In the wake of the Great Recession, Europe's economy has stagnated to a considerable degree-greater even than that of the United States. Forecasts suggest an abysmal annual growth rate of about one percent over the next five years, and it now appears that Europe's enviable structural features, that is, their superior social safety net, leading educational facilities, and outstanding infrastructure will be in jeopardy if higher levels of growth cannot be achieved in the mid- to long-term.
Several European countries have sought to stimulate growth through monetary or fiscal means, but in the view of some economists, this focus on the demand side ignores the need to address supply issues.
In Europe's Growth Challenge, Anders Aslund and Simeon Djankov show how countries in Central and Eastern Europe have recently adopted economic policies that could prove useful in expanding business and economic activity in Western and Southern Europe. These include reducing the financial role of the state, adjusting tax systems, improving the environment for startups, and easing controls over labor markets and migration policies. The Netherlands, they note, has already introduced humane pension reforms that could be adopted more broadly on the continent. The authors also outline how sectoral changes in the service market, high-tech development, and energy markets, more successfully pursued in the U.S., could profit many European countries.
Authors Anders Aslund and Simeon Djankov conclude with a call for crucial continental institutional reforms at the European Commission of the European Union, the European Parliament, and the European Council of Ministers. If enacted, this bold program may be just what is needed to reinvigorate the slumping European economy.
Anders Aslund is a Senior Fellow at the Atlantic Council in Washington, DC.
Simeon Djankov is a Visiting Fellow at the Peterson Institute of International Economics and Rector at the New Economic School in Moscow.