The crisis of the eurozone has been off the front pages around here for a while. And of course trendy left wing opinion is in thrall to the European model of high tax, high spend, cradle-to-grave social programs, single payer health care and long vacations. So are the economies over there performing in any remotely satisfactory manner?
You won't find it in today's New York Times (maybe tomorrow?), but second quarter economic statistics are in for Europe, and the news is ugly -- stagnation in some places to even decline in others. From Bloomberg news this morning:
German gross domestic product shrank 0.2 percent, more than economists forecast, while French data also released today showing the economy stagnated prompted the government to scrap its 2014 deficit target. Combined with Italy’s unexpected slide into recession, the reports may add pressure on the European Central Bank to expand stimulus. . . . Euro-area GDP growth probably slowed to 0.1 percent in the second quarter from 0.2 percent in the first three months of the year, according to a separate Bloomberg survey.
Well, I suppose you can count 0.1% as "growth" if you have a sufficiently powerful microscope available to measure it. And from the BBC:
Growth in the eurozone flatlined in the second quarter . . . according to official figures. The eurozone saw 0.0% growth compared with the first quarter, according to Eurostat figures.
Seems that Eurostat doesn't have quite as high-powered a microscope as Bloomberg News.
If you think that U.S. economic performance remains sub-par, you really need to look at the EU. While U.S. unemployment is 6.1% (systematically understated I would say, but that's another story), the eurozone per its statistical agency Eurostat admits to a rate of 11.5%, and the countries that engage in the most irresponsible government spending are generally well above the average (Greece - 27.2%; Spain - 24.5%; Portugal - 14.1%; Italy - 12.3%).
Can we learn from this then that irresponsible government spending and debt accumulation lead to the destruction of economic growth and to destruction of opportunity for young people coming into the system? That would be my conclusion, but remarkably everybody who's anybody seems to reach exactly the opposite conclusion. For example, Bloomberg has an editorial today entitled "Europe's Economy Is Broken" that advocates, in jargon-laden mumbo jumbo, for yet more government spending as the cure for the stagnation:
German policy makers have resisted proposals to loosen the euro area's agreed fiscal targets. The European Commission has echoed the same line, insisting that supply-side reforms are the key to recovery. This is short-sighted. Europe needs both demand-side and supply-side stimulus -- but the first is both more urgent and can be delivered more promptly.
"Demand side stimulus" is fancy schmancy economist-speak for additional wasteful government spending. I can't find the IMF yet coming out as advocating more "fiscal stimulus" for Europe, but since that is their normal M.O., I predict it won't be long.
Mind you, these are countries that are already spending close to 50% of GDP on the government, and in some cases more. Here's a helpful chart from Wikipedia via the Heritage Foundation that lists government spending as a percent of GDP by country. Examples: France 56.1%; Greece 51.9%; Spain 45.2%; Portugal 49.4%; Germany 45.4%; UK 48.5%. (For comparison, the U.S. is at 41.6%, Switzerland at 33.8%; Singapore at 17.1%. Do you notice any correlation between government spending level and relative economic success?) If spending of 56.1% of GDP on the government hasn't yet "stimulated" France into economic rapture, how is pushing that up to 60% going to make things any better?
In my case, I can't find anything to admire about how the Euorpeans run their economies.