Growing Up in the Eurozone
At their meeting at the end of June, European leaders acknowledged for the first time the multiple dimensions of the crisis, accepting that austerity – putting everyone’s house in order – will not suffice. What is still missing, however, is recognition of the need for greater flexibility on fiscal-consolidation efforts.
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MILAN – A rapid and large increase of government debt has been a general phenomenon in the advanced countries since the 2007-09 crisis: for the first time, the average debt/GDP ratio for OECD countries has surpassed 100%. Fiscal consolidation will weigh on growth prospects for two generations to come, and the welfare state as we have known it in Europe since World War II will have to be transformed, especially given a rapidly aging population.