Europe's Stimulus and Recovery

http://www.futureofcapitalism.com/2009/08/europes-stimulus-and-recovery

"Germany and France have escaped from recession surprisingly quickly, outpacing the U.S. in returning to growth thanks in part to government stimulus efforts," The Wall Street Journal reports on its front page today. If it's the stimulus that is to be credited for the recovery, you'd think that the larger the stimulus, the quicker the recovery. But no; the Journal reported back in March: "According to IMF figures, Germany's 2009 emergency spending is 1.5% of gross domestic product, compared with 2% for the U.S. But Germany's automatic stabilizers will narrow the gap, contributing an additional 1.7%, for a total of 3.2% of GDP. The U.S. stabilizers add 1.5% for a total of 3.5%, still slightly higher than Germany." Smaller stimulus in Germany, but quicker recovery there. The French stimulus was 1.3% of France's GDP, while the U.S. stimulus was 5.5% of GDP, according to this Reuters dispatch. That may overestimate the size of the U.S. stimulus, but still, smaller stimulus in France, quicker recovery there. Now there may be other reasons than the size of the stimulus that France and Germany are recovering more quickly than America. But if the Journal in a front-page news article is going to credit "government stimulus efforts" for the fact that Germany and France are recovering more quickly than America is, the least it might want to do is note that those stimulus efforts in those countries were smaller than those in America, which, with its bigger stimulus, is having a slower recovery. In other words, more government spending isn't necessarily an economic cure-all.

by Editor  |  Aug 14, 2009 at 7:40 am Related Topics:  Stimulus receive the latest by email: subscribe to the free futureofcapitalism.com mailing list