# Why aren't things working better in Europe?
**URL:** https://boards.straightdope.com/t/why-arent-things-working-better-in-europe/592967
**Category:** Great Debates
**Created:** [August 16, 2011, 11:16pm UTC](https://boards.straightdope.com/t/why-arent-things-working-better-in-europe/592967 "2011-08-16T23:16:09Z")
**Posts on this page:** 20
**Page:** 2
### Author:  [@2sense](https://boards.straightdope.com/u/2sense)
#### Post date: [August 17, 2011, 7:41am UTC](https://boards.straightdope.com/t/why-arent-things-working-better-in-europe/592967/21 "2011-08-17T07:41:46Z")
According to Paul Krugman, Europe got into the mess the same way we did: housing bubbles and toxic derivatives. They compounded it the same way we did: austerity measures to cut government spending at exactly the wrong time. But they did better than us initially because their stronger social safety nets didn’t allow them to reduce spending as much.
However, he also suggests that the EU is in a much worse situation than the US because some countries are really hurting and they have integrated their currency without integrating their labor force. That is, Greeks and Portuguese are less willing and able to move to the countries where the jobs are to even things out while their governments are unable to manipulate their currencies to soften the blow since they are using the Euro. The US economy is stronger overall because it is integrated and we retain our sovereign currency. So people could move south out of Pittsburgh when steel mills closed and we can devalue the dollar to make it cheaper to pay off our debt and improve our balance of trade.
(If Krugman counts as a liberal. He identifies as one but he is a free trader, after all.)
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### Author:  [@Capitaine\_Zombie](https://boards.straightdope.com/u/Capitaine_Zombie)
#### Post date: [August 17, 2011, 9:23am UTC](https://boards.straightdope.com/t/why-arent-things-working-better-in-europe/592967/22 "2011-08-17T09:23:49Z")
> [@2sense](#):
>
> According to Paul Krugman, Europe got into the mess the same way we did: housing bubbles and toxic derivatives. They compounded it the same way we did: austerity measures to cut government spending at exactly the wrong time. But they did better than us initially because their stronger social safety nets didn’t allow them to reduce spending as much.
>
> However, he also suggests that the EU is in a much worse situation than the US because some countries are really hurting and they have integrated their currency without integrating their labor force. That is, Greeks and Portuguese are less willing and able to move to the countries where the jobs are to even things out while their governments are unable to manipulate their currencies to soften the blow since they are using the Euro. The US economy is stronger overall because it is integrated and we retain our sovereign currency. So people could move south out of Pittsburgh when steel mills closed and we can devalue the dollar to make it cheaper to pay off our debt and improve our balance of trade.
>
> (If Krugman counts as a liberal. He identifies as one but he is a free trader, after all.)
Arent both Portugual and Greece strong emigration countries (at the very least, they used to be) ?
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### Author:  [@SecondJudith](https://boards.straightdope.com/u/SecondJudith)
#### Post date: [August 17, 2011, 10:38am UTC](https://boards.straightdope.com/t/why-arent-things-working-better-in-europe/592967/23 "2011-08-17T10:38:00Z")
> [@An\_Gadai](#):
>
> Micro-nitpick, Ireland is in Northern Europe, the I in PIGS.
I thought Italy must be the I in the PIGS **treis** meant - I usually see it as PIIGS, Portugal, Ireland, Italy, Greece and Spain.
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### Author:  [@Rune](https://boards.straightdope.com/u/Rune)
#### Post date: [August 17, 2011, 10:59am UTC](https://boards.straightdope.com/t/why-arent-things-working-better-in-europe/592967/24 "2011-08-17T10:59:59Z")
Some also use the PIIGGS, to include Great Britain.
Some parts of Europe is doing bad because of decades of public overspending and way too much debt, for too long. A little present the current aging generation leaves for future generations. Thanks geezers. It’s trouble only worsened by the current global economic crisis, but that would have come eventually under all circumstances. It’ll take years or possible decades to bring the debt back on a manageable level. For this time growth will be stunted. Money used on servicing debt is money not used on consumption. And people advocating greater deficit spending should ask themselves if they’d want to invest their pension savings in Greek bonds if they were not convinced Germany would back them up. In addition productivity in Spain/Italy is low and the economy is stifled by an inflexible labour market and too much regulation. Spain, like Ireland, also had a building boom and now the regional banks sit with a great deal of bad loans. More debt.
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### Author:  [@Martin\_Hyde](https://boards.straightdope.com/u/Martin_Hyde)
#### Post date: [August 17, 2011, 12:00pm UTC](https://boards.straightdope.com/t/why-arent-things-working-better-in-europe/592967/25 "2011-08-17T12:00:06Z")
One of the things about Germany at least is that during an economic downturn manufacturers do not instantly layoff tons of workers. It is more restrictive there and while people do lose their jobs in a bad economy, it isn’t so “hair trigger” a response as it can be in the United States. Further I would argue when German companies do it they do it because they legitimately cannot keep all their workers paid. When American companies lay workers off there is unfortunately some evidence to suggest it is often almost entirely based on maintaining good stock market financials because that is what the CEO’s bonuses are based on.
Not to say all American layoffs are invalid and only designed to placate investors to the long term detriment of the company, only that some of them are while in Germany that isn’t really an accepted practice.
What this tends to do is as long as global demand eventually picks back up, German manufacturers are going to be very well positioned to fill orders, because they have not decimated their workforce. Notice Volkswagen is now building factories here in the States and has a reasonable chance at becoming the world’s largest automaker within the next decade. In part that is because they have the strategic advantage of keeping a trained workforce around through the leaner times so that they have the personnel ready to go to take advantage of recoveries. Ford and GM did not have that to the same degree.
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### Author:  [@Rune](https://boards.straightdope.com/u/Rune)
#### Post date: [August 17, 2011, 12:09pm UTC](https://boards.straightdope.com/t/why-arent-things-working-better-in-europe/592967/26 "2011-08-17T12:09:26Z")
The more restrictive German labour laws also meant that Germany was riddled with a persistent high unemployment rate in the decade leading up till the current financial crisis (compared to for instance Denmark). And especially a high youth unemployment rate. The labour laws may mean that companies are more reluctant to let people go on a downturn, but it also means that they are more reluctant to hire people in an economic upturn.
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### Author:  [@Mijin](https://boards.straightdope.com/u/Mijin)
#### Post date: [August 17, 2011, 12:37pm UTC](https://boards.straightdope.com/t/why-arent-things-working-better-in-europe/592967/27 "2011-08-17T12:37:33Z")
In some ways Europe is at the other extreme as the US – overly generous social support, taxes which strangle the economy and restrictive labour laws.
There’s no inconsistency in saying america should raise taxes and europe should reduce them (not that I’m saying that myself).
In the case of britain I think public spending (on things like public sector jobs and pensions, not so much social security) is way out of control. Successive governments have failed to stand up to the unions. That’s our main problem.
Things like healthcare are getting very expensive now. We still pay much less per patient than the US, but like the US costs are often hidden, so there are few downward pressures on the costs of equipment and pharma.
We also subsidize industries, mainly for political rather than economic reasons. Europe wastes a lot of money subsidizing farmers and it seems unlikely to change for some time.
\
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### Author:  [@Mijin](https://boards.straightdope.com/u/Mijin)
#### Post date: [August 17, 2011, 12:47pm UTC](https://boards.straightdope.com/t/why-arent-things-working-better-in-europe/592967/28 "2011-08-17T12:47:34Z")
> [@Mijin](#):
>
> We still pay much less per patient than the US
btw For this I was thinking of total costs. I would assume that public spending on healthcare is less in the US.
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### Author:  [@Great\_Antibob](https://boards.straightdope.com/u/Great_Antibob)
#### Post date: [August 17, 2011, 1:58pm UTC](https://boards.straightdope.com/t/why-arent-things-working-better-in-europe/592967/29 "2011-08-17T13:58:32Z")
> [@Capitaine\_Zombie](#):
>
> Arent both Portugual and Greece strong emigration countries (at the very least, they used to be) ?
Not sure about Portugal or Greece, but “strong” is relative.
In the US, it’s not surprising at all to have been born in Hawaii, go to school in Connecticut or Massachusetts, move to Illinois, and finally take a job in DC.
If one state is not doing so well, it’s no big problem packing up and moving to a different state. Texas’ job “miracle” is more about people moving here than any sort of business-friendly climate.
While there’s some labor mobility in some parts of Europe, it’s not nearly as common as the US and it’s certainly more involved than packing up and driving a few hundred miles.
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### Author:  [@Marley23](https://boards.straightdope.com/u/Marley23)
#### Post date: [August 17, 2011, 2:09pm UTC](https://boards.straightdope.com/t/why-arent-things-working-better-in-europe/592967/30 "2011-08-17T14:09:06Z")
> [@MOIDALIZE](#):
>
> Are you really this lazy?
In the future, please just post the information (or let someone else do it) instead of insulting other posters.
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### Author:  [@MOIDALIZE](https://boards.straightdope.com/u/MOIDALIZE)
#### Post date: [August 17, 2011, 2:23pm UTC](https://boards.straightdope.com/t/why-arent-things-working-better-in-europe/592967/31 "2011-08-17T14:23:47Z")
> [@Marley23](#):
>
> In the future, please just post the information (or let someone else do it) instead of insulting other posters.
Why should I have to post anything? He’s the one who posted a half-baked OP that draws conclusions based on what he guesses the data might say. Go look it up first!
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### Author:  [@XT](https://boards.straightdope.com/u/XT)
#### Post date: [August 17, 2011, 3:09pm UTC](https://boards.straightdope.com/t/why-arent-things-working-better-in-europe/592967/32 "2011-08-17T15:09:50Z")
[QUOTE=MOIDALIZE]
Why should I have to post anything? He’s the one who posted a half-baked OP that draws conclusions based on what he guesses the data might say. Go look it up first!
[/QUOTE]
I based the OP on the linked article I also posted in the OP. Did you click on the link and read it? Here, let me help:
> [@](#):
>
> European leaders call for action as economy hits wall
> [@](#):
>
> NEW YORK (CNNMoney) – The leaders of France and Germany on Tuesday called for more integrated economic policies to help stabilize the euro and restore growth across the European Union.
>
> But the comments disappointed many on Wall Street who were hoping the leaders would announce new plans to contain the sovereign debt crisis roiling global markets.
>
> French President Nicolas Sarkozy and German Chancellor Angela Merkel met in Paris to discuss, among other things, a proposed “golden rule” to require all 17 members of the currency union to commit to balanced budgets.
I mentioned France and Germany because, you know, they were IN THE LINKED ARTICLE:
> [@](#):
>
> Germany, the largest economy in Europe, nearly ground to a halt in the quarter. The nation’s GDP grew at a quarterly rate of only 0.1%, down from 1.3% in the first quarter.
>
> France, the second largest EU economy, reported last week that its economy did not grow at all in the second quarter.
But I wasn’t wanting to focus on just one country in Europe, since the article was about the overall European situation. I was ASKING for information…if I knew the answers, well, I wouldn’t have to ask for opinions…I would have, instead, said ‘This is the way it is…discuss’. See the difference?
(Also, I have to apologize…I started this OP while I was on the road thinking I’d be home for a week or so, but last night I got called to one of our sites that is totally TU, so I probably won’t be posting much for the next few days)
-XT
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### Author:  [@YogSothoth](https://boards.straightdope.com/u/YogSothoth)
#### Post date: [August 17, 2011, 3:15pm UTC](https://boards.straightdope.com/t/why-arent-things-working-better-in-europe/592967/33 "2011-08-17T15:15:52Z")
> [@xtisme](#):
>
> So, it’s the aggregate that is pulling everyone down?
It would be more accurate to say that there seems to be more weaker countries than economically stronger ones (on account of the entire world being down right nwo), and through ties via the EU, the weaker ones exert more net economic negativity than the stronger ones can exert in the other direction. Not that Germany could go it alone, somebody’s gotta buy those Volkswagons and bratwursts.
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### Author:  [@XT](https://boards.straightdope.com/u/XT)
#### Post date: [August 17, 2011, 3:22pm UTC](https://boards.straightdope.com/t/why-arent-things-working-better-in-europe/592967/34 "2011-08-17T15:22:52Z")
[QUOTE=MOIDALIZE]
Are you really this lazy?
[/QUOTE]
I am possibly 5 of the laziest people on this message board…orders of magnitude more lazy that you can probably imagine.
[QUOTE=treis]
Unemployment is 9.2% in the states vs. 6% for Germany.
[/QUOTE]
which would mean that ‘I believe that unemployment is better’, right? 6.0 is better than 9.2, last time I checked. 😉
> [@](#):
>
> I would be careful about directly comparing GDP growth. Population in the USA is rising, while IIRC it’s stagnating or shrinking in much of Europe.
I’m not using any metrics at all. I’m going based on articles such as the one I linked to in the OP showing that Europe, as a whole, is doing poorly. Feel free to use any metrics you like to show that this isn’t happening, or is only happening in selected countries while others in the aggregate are bringing everyone else down. My question was why aren’t things doing better in Europe, as a whole. There have been many good answers in this thread that addressed the actual question.
> [@](#):
>
> I submit that this is a poorly constructed OP. I don’t have numbers off the hand, but my impression is that Europe has done substantially better in the recent economic troubles than the USA. Of course, Europe can’t really be treated as a whole. The PIGS are doing pretty bad, but Northern Europe seems to be much better off.
It probably was poorly constructed…I should have quoted some from the linked article and done some additional scrounging for additional data. There are tons of articles out there right now decrying how badly Europe, as a whole, is doing right now, and I assumed it was something that everyone was following…and hoping that some of the folks who know more about economics and markets could explain to me why Europe is doing so poorly, overall…really no better or worse (seemingly, to me…could be wrong) than the US, and this despite having all the things that many claim we need in order to get out of the current doldrums.
-XT
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### Author:  [@Ximenean](https://boards.straightdope.com/u/Ximenean)
#### Post date: [August 17, 2011, 3:46pm UTC](https://boards.straightdope.com/t/why-arent-things-working-better-in-europe/592967/35 "2011-08-17T15:46:47Z")
I don’t see any point in arguing that “this works/doesn’t work in Europe, so why should/shouldn’t we try it here?” The economies of the various blocs are not directly comparable. Within Europe, there’s the EU-countries and the non-EU countries, which include significant economies such as Switzerland and Norway, not to mention Russia, and within the EU there’s the eurozone and the non-euro-using countries, which include the UK, Denmark and Sweden.
Some of those blocs and/or countries face similar problems to the US, coming off the back of a credit bubble and banking crisis, but some don’t, and others have additional worries, such as the ongoing crisis in the eurozone, which has no obvious solution and could turn very nasty.
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### Author:  [@treis](https://boards.straightdope.com/u/treis)
#### Post date: [August 17, 2011, 5:07pm UTC](https://boards.straightdope.com/t/why-arent-things-working-better-in-europe/592967/36 "2011-08-17T17:07:55Z")
> [@xtisme](#):
>
> It probably was poorly constructed…I should have quoted some from the linked article and done some additional scrounging for additional data. There are tons of articles out there right now decrying how badly Europe, as a whole, is doing right now, and I assumed it was something that everyone was following…and hoping that some of the folks who know more about economics and markets could explain to me why Europe is doing so poorly, overall…really no better or worse (seemingly, to me…could be wrong) than the US, and this despite having all the things that many claim we need in order to get out of the current doldrums.
>
> -XT
I think you need to reread those articles. The concern is about a handful of governments defaulting on debt, and what the repercussions would be for the Euro. That’s the concern for Northern Europe. Otherwise, they collectively are doing a lot better than the U.S. during this recession. Somehow, I don’t think that fact is going to change your tune.
If you want a brief rundown of the problems in Europe:
Ireland: Housing boom, and their banks were heavily invested, relative to Ireland’s GDP, in the type of investments that went bust. The cost of bailing out/nationalizing the banks is staggering. 65 billion Euros or 40% of GDP. That’s really what the problem is.
Italy: This is really a N. Italy vs S. Italy thing. N. Italy is well off, and doing fine economically. I can’t really speak too much about why there is a gap, but it’s been there for over a century. It probably has do with Italy’s notoriously ineffective and corrupt government. Realistically though, their debt is high, but still manageable. And, more importantly for this thread, there economy hasn’t been doing worse than the USA.
Greece: Total clusterfuck. The Govt lied about the debt and deficit for years. The economy is heavily regulated, and many industries are protected. Tax payments are extremely low, and basically everyone cheats and gets away with it. I could go on, but Greece’s problems have nothing to do with large safety net vs. low safety net.
Spain: Boomed with real estate (16% of GDP at one point), and now is busting with real estate.
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### Author:  [@XT](https://boards.straightdope.com/u/XT)
#### Post date: [August 17, 2011, 6:39pm UTC](https://boards.straightdope.com/t/why-arent-things-working-better-in-europe/592967/37 "2011-08-17T18:39:50Z")
[QUOTE=treis]
I think you need to reread those articles. The concern is about a handful of governments defaulting on debt, and what the repercussions would be for the Euro. That’s the concern for Northern Europe. Otherwise, they collectively are doing a lot better than the U.S. during this recession. Somehow, I don’t think that fact is going to change your tune.
[/QUOTE]
No? Considering that it answers the questions I’m asking, I am puzzled as to why it wouldn’t change my ‘tune’. Do you have some cites that they are collectively doing better than the US during this recession? If so, then that certainly would go a long way to changing my preconceptions.
Thanks for the thumbnail run down btw…appreciated.
-XT
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### Author:  [@Asympotically\_fat](https://boards.straightdope.com/u/Asympotically_fat)
#### Post date: [August 17, 2011, 6:45pm UTC](https://boards.straightdope.com/t/why-arent-things-working-better-in-europe/592967/38 "2011-08-17T18:45:10Z")
IMO the USA is a failed state, it has one of the lowest soccer stadiums per capita in the World.
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### Author:  [@treis](https://boards.straightdope.com/u/treis)
#### Post date: [August 17, 2011, 8:41pm UTC](https://boards.straightdope.com/t/why-arent-things-working-better-in-europe/592967/39 "2011-08-17T20:41:27Z")
> [@xtisme](#):
>
> No? Considering that it answers the questions I’m asking, I am puzzled as to why it wouldn’t change my ‘tune’. Do you have some cites that they are collectively doing better than the US during this recession? If so, then that certainly would go a long way to changing my preconceptions.
> Thanks for the thumbnail run down btw…appreciated.
>
> -XT
> **[United States GDP per capita](https://tradingeconomics.com/united-states/gdp-per-capita)**
>
> The Gross Domestic Product per capita in the United States was last recorded at 66682.61 US dollars in 2024. The GDP per Capita in the United States is equivalent to 528 percent of the world's average. This page provides - United States GDP per...
> **[Germany GDP per capita](https://tradingeconomics.com/germany/gdp-per-capita)**
>
> The Gross Domestic Product per capita in Germany was last recorded at 44108.70 US dollars in 2024. The GDP per Capita in Germany is equivalent to 349 percent of the world's average. This page provides the latest reported value for - Germany GDP per...
As you can see, Germany more or less shrugged off the recent recession. Other northern European countries aren’t as good as Germany, but most of them managed to break even or grow a bit.
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### Author:  [@Martin\_Hyde](https://boards.straightdope.com/u/Martin_Hyde)
#### Post date: [August 19, 2011, 1:22pm UTC](https://boards.straightdope.com/t/why-arent-things-working-better-in-europe/592967/40 "2011-08-19T13:22:08Z")
> [@Rune](#):
>
> The more restrictive German labour laws also meant that Germany was riddled with a persistent high unemployment rate in the decade leading up till the current financial crisis (compared to for instance Denmark). And especially a high youth unemployment rate. The labour laws may mean that companies are more reluctant to let people go on a downturn, but it also means that they are more reluctant to hire people in an economic upturn.
Oh, absolutely. When government has a strong hand in controlling things like that, it always results in such a situation. Strict rent control regimes almost invariably result in housing shortages, tight labor laws result in fewer jobs and higher institutional unemployment.
I won’t argue for it being good or bad, economically I think the higher institutional or “natural” unemployment of a country like Germany is almost proven fact (or as close to it as can be in a field like economics.) There may be valid reasons a society chooses such an outcome, though. As long as that society is willing to provide some level of social services for its unemployed, and as long as the institutional unemployed are a “revolving group of individuals” and not the same group perpetually without work the system won’t break down.
I think the Germans were pretty good to start implementing policies that try to insure people who are unemployed try to get jobs, and when they saw that it worked somewhat for them I even saw some articles in which Germans were saying the U.S. should take a cue from them on how to get people off unemployment. What is funny is most of the German changes have been parts of our unemployment system for generations
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