The Vanishing European - For

The Vanishing European - For the past decade, Japan has suffered an economic downturn that has been terribly exacerbated by the very structure of their economy.

Europeans, especially Germans, thought they were above it all - engrossed in reunification and the EU, but with a vastly different banking system and political (and to a lesser extent, social) structure, the Europeans thought they were immune from the Japanese economy's illness.

Today, they're confronting the ugly truth - they may share more with the Japanese than they thought. This article appears in the relatively conservative (by German standards) Frankfurter Allgemeine Zeitung (English and German editions):

Both countries are former economic miracle countries whose strength has failed amid a number of shocks - in the German case, above all the effects of unification and the stock market collapse. Both are heavily export-oriented and suffer from subdued domestic consumption, with a relatively rigidified labor market that does not respond well to external shocks. Most disconcertingly, both share an inability to reform.
With government's latest policy proposals set to perpetuate Germany's economic ailments, some economists believe the specter of deflation is no longer out of the question in a country that traditionally fears inflation more than anything else.

Now, the big question - will the US be ripe for the same sort of deflation? Some think so. It's not a pretty thought.

Posted by Mitch at October 29, 2002 03:23 PM