With the Brexit saga hogging the newsflow, the flaws and contradictions of the euro project have become less topical, yet they will continue to pose serious risks to economic and political stability well after Britain’s relationship with the EU is settled. Economic logic requires the Eurozone to morph into a single state with fiscal transfers from richer to poorer areas. Politics makes that impossible for the foreseeable future. The next significant recession could spark off a chain reaction of rising unemployment, populist rage and street violence that would make the recent “Gilets Jaunes” protests in France look mild.
Talk of the “Japanification” of Europe is doubly misleading because Japan today is not the stagnant and deflationary Japan of 1997 or 2010. The current economic expansion is, at 72 months old, on the cusp of becoming the longest since the war. During that period, employment has soared to unprecedented levels and business investment has risen to the highest share of GDP in a quarter of a century.
Plus: “Japan’s total fertility rate is higher than the rates for several European countries, including, depending on the year and the source, Portugal, Poland, Spain, Greece, Italy and Germany.” And Japan’s fertility rate sucks.