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Is the EU suited to handle the crisis? April 1, 2009

Posted by Sverre in : Political economy, World politics , add a comment

Keeping up the recent days’ interest in the EU’s response to the financial crisis, I came across Megan McArdle’s comments on the apparent failure of EU states to apply enough stimulus to the economy, and points to a significant system failure within the EU system:

But as multiple people have blogged, this isn’t just a matter of the infamous tight-fistedness of Germany’s fiscal and monetary policy, born out of the ashes of Weimar; it’s genuinely harder for Europe to run a stimulative policy.  For one thing, they can’t coordinate a broad European policy, which means that any government will see substantial amount of any stimulus “leak” abroad–and also that there is great temptation to free ride.  For another, they aren’t the world reserve currency, so they can’t borrow on the same lavish, practically interest-free scale as the US Treasury.

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