(Editorial note: This is the first article translated into English published before in German language on this site Wirtschaft und Gesellschaft – Analyse und Meinung [Economy and Society - Analysis & Opinion]. More articles will follow).
A few days ago the Directorate-General of the European Commission, Eurostat, in the euro area. Looking at the latest four quarters recession has deepened – Germany approaching zero growth. However, the situation in the United States is quite different.
The data suggest, that the so called countries in crisis, Greece, Portugal, Spain and Italy respectively, are not on the path to recovery, as some presume – among them German Chancellor Angela Merkel – but facing a deepening recession.
Quarterly growth rates of GDP (click to enlarge chart)
What is interesting is that the figures for the United States, which Eurostat also presents, are suggesting far better results. However, the United States also have not followed the European way of austerity, i.e. drastic spending cuts. Correspondingly, consumption and capital formation in the United States have developed quite differently from the euro area.
Though Government final expenditure has decreased in both cases, private consumption expenditure has increased in the United States over the past four quarters, whereas it has decreased over the same period in the euro area. The same with capital formation: While gross capital formation in the United States has dynamically increased over the last three quarters, it has dynamically decreased in the euro area over the same period.
Expenditure Components of GDP, Euro area and United States (click to enlarge chart)
Does that ring a bell? Whether the people in power in Europe have already thought about what would have happened if the United States had practiced the same economic policy of austerity? Perhaps they will soon have the chance to do so – in case the United States will fall off the fiscal cliff! It´s certainly not desirable, but it would be didactically useful for European policy makers.
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