Wednesday, May 30, 2012

Real economic growth since 2007

The change is in real GDP from the second quarter of 2007 to the first quarter of 2012, except for Greece (where the data is up to the first quarter of 2011).
% change
Germany +3.2
US +2.5
France +0.3
Euro area -0.3
Japan -1.2
Spain -2.4
Britain -2.6
Portugal -4.3
Italy -5.7
Greece -8.2
Ireland -9.0

A couple of points are striking. Spain has performed better than Britain overall. And even though Germany has done better than the rest, the euro area has not grown in aggregate over five years. That is why there is a debt crisis; when you take on debt, either the debtor or the creditor must assume that the former will prosper. If the economy doesn't grow in real terms, that creates a problem; the debtor will either default or try to inflate the debt away.
Structural reform could boost European growth but only over the long-term. In the meantime, Europe remains divided between the inflate and default options. Until it decides (and comes through the resulting pain), the crisis won't really be over.

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