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A Lawmaker’s Guide to the Next Fiscal Crisis
Every government with debt on hand, and especially those with debt levels that are already unsustainable, must get to work on a contingency plan for the coming recession.
Every government with debt on hand, and especially those with debt levels that are already unsustainable, must get to work on a contingency plan for the coming recession.
Given the high level of economic integration in Europe, it is unlikely that a recession will be confined to half the continent.
Overall, she cautioned, the world has become more economically volatile and governments need to be prepared.
Although some countries have recovered, overall economic activity has been disappointing. To make matters worse, a closer look at capital formation—a.k.a., business investments—and consumer spending suggest that a recession is in fact just around the corner.
Some forecasters believe that inflation will persist for an extended period of time. I disagree, and if the signs of an inflation peak are as strong as I believe they are, then Europe could be out of this inflation episode before next summer.
A conservative system of benefits protects citizens from destitution, but to succeed, the definition of poverty needs to be overhauled. The Heritage Foundation is moving in this direction, and their ideas could positively impact European welfare policy.
When a currency depreciates, it can lead to a self-reinforcing outflow of capital—especially when the depreciation is unprecedented. The euro has never been this weak against the dollar.
While it is correct that a recession is defined by two consecutive quarters of declining GDP, it is not correct that the American GDP declined two quarters in a row. Unfortunately, all the economists and analysts who made the recession call were wrong.
Bloomberg suggests that consumers “sitting on 700 billion-euro ($753 billion) cash” is reason enough to predict macroeconomic resiliency in Europe, but this report is contradicted by findings by Eurostat on retail trade in the euro area and the EU as a whole.
A new debt crisis looks unavoidable. There is practically no interest in fiscal reforms across Europe, leaving the continent vulnerable to a destructive downward spiral of rising interest rates and structural budget deficits.