I already explained in a previous articles why the US is performing much better than Europe.
6th Oct 2014 - Europe must learn from the US
Everybody other than Germany and core Europe allies seems to know that Europe must take a mix of these steps to get out of the deflationary spiral it is approaching:
a. Countries that have fiscal space must use it to create internal demand which sucks in imports from countries in fiscal distress.
b. Special initiative to launch an aggressive infrastructure investment programme has to be immediately undertaken if necessary financed by more flexibility in fiscal discipline.
c. ECB must support the economy by aggressive non-conventional monetary easing measures.
d. Countries in distress must continue with their painful economic restructuring in order to regain competitiveness.
Unfortunately Europe seems lost in semantic arguments between core and peripheral countries. The former maintain that fiscal consolidation is a precondition for economic growth ( meaning that problems countries can only solve their problems by first becoming mirror images of Germany) whereas the latter insist that restructuring without growth is practically impossible and risk threatening the democratic pillars of society.
But not all is lost.
Whilst country leaders are stuck in useless arguments and as the ECB lacks the necessary consensus to do the monetary easing push that is clearly necessary, the market is working its way to solve Europe's problems in the most effective manner.
The fall in the Euro against the dollar and the fall in the price of oil will be the most effective medicine to cure European competitiveness. There is room for optimism not just on the US economy, which is already flying, but also on Europe's economy which in 2015 will benefit from a double boost of falling Euro and falling oil.
And this would be in spite of not because of its political leaders.
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