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EU's Growth Gap
Investor's Business Daily ^ | Feb. 19, 2005 | Editorial Staff

Posted on 02/19/2005 12:29:50 PM PST by Kitten Festival

Economics: Europe has been the source of many of America's most beloved fairy tales. Not all are of ancient origin. Take the European Union's insistence five years ago that its economy would leapfrog ours by 2010.

The so-called Lisbon Strategy was unveiled with much fanfare. Struck in the Portuguese capital, the deal essentially predicted the EU economy would pass up America's and leave it in the dust.

At the time, it sounded reasonable. The EU was adding new members, and the common wisdom was that the U.S., though a big military power, was suffering from what geostrategists like to call "imperial overreach." Europeans, with their savvy ways and state-directed investment schemes, would soon be No. 1.

Didn't happen. Since 1991, output has grown 27% faster in the U.S. than in the EU — a big difference. And those who expected the gap to narrow after 9-11, as the U.S. spent hundreds of billions fighting terror, have been sorely disappointed. The gap is widening.

(Excerpt) Read more at investors.com ...


TOPICS: Culture/Society; Editorial; Foreign Affairs; Germany; Government; News/Current Events; United Kingdom
KEYWORDS: arabs; arrogant; basketcase; belgium; demographics; economics; eu; eurabia; europe; fallingbehind; france; germany; globalism; goitalone; hegemony; hyperpower; ibd; immigration; imperialoverreach; islamofascists; leftinthedust; lisbonstrategy; losers; overtake; portugal; shrinking; spain; trade; uk; usa; zerogrowth; zeropopulation
Europe declared it would overake us a few years back. They are now proudly shriveling into nothing and screaming at us like dorothy's witch covered in water.
1 posted on 02/19/2005 12:29:55 PM PST by Kitten Festival
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To: Kitten Festival

The EU just needs to form another commission and five year plan. Less liberty and more planning is all they need.


2 posted on 02/19/2005 12:40:44 PM PST by Maynerd
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To: Kitten Festival

What I find hard to understand is the value of the Euro vs. the Dollar. Now I am no genius, but why do people place value on the Euro when the economies of the main countries backing it are so bad?


3 posted on 02/19/2005 12:41:46 PM PST by sgtbono2002
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To: Kitten Festival
nice post. check out the following from the article.

A study last year by the U.S. Labor Department also compared long-term trends in the U.S. and other countries. It pegged real per-capita GDP in the U.S. at $34,960 in 2003, a full 24% higher than the $26,698 average in Europe's biggest, richest countries.

The average EU worker would think they had died and gone to heaven if they worked in Fort Worth, went to the museums, ballet, symphony, jazz clubs and went home to a 3,000 sq ft house that costs half of the price of an EU 1200 apartment. Years ago a Russian was on a tour with city leaders, he went in to an Albertsons late in the evening with the mayor he asked, "Yes, this is nice but where do the regular people shop?"

4 posted on 02/19/2005 12:55:01 PM PST by q_an_a
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To: Kitten Festival

By golly, what they need is...A Summit!!


5 posted on 02/19/2005 1:13:50 PM PST by AmericanChef
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To: Kitten Festival

The EU is the orgasmic dream of all Free-Traders. One currency, etc. Look what that dream has become! A nightmare!!!!


6 posted on 02/19/2005 1:21:09 PM PST by NEBUCHADNEZZAR1961
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To: Kitten Festival
The irony is that most European economists have long since realized that it is the welfare state and over-regulated labor market that is the cause of their problem, and that adopting the American approach would fix their low growth and high unemployment problems.

Currently those economists are split between those who love socialism too much even though they realize it doesn't work, and those that fear actually implementing any reforms because too many people are dependent on the welfare state.
7 posted on 02/19/2005 1:26:13 PM PST by Moral Hazard (Sod off, Swampy)
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To: AmericanChef

No sheet shurlock!


8 posted on 02/19/2005 1:27:55 PM PST by Kitten Festival (The Thug of Caracas has got to go.)
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To: sgtbono2002

easy: TWO SETS OF BOOKS.

Seriously, the Eurostat which is responsible for EUecconomy statistics has been caught up in two major book fixing scandals.

The euro is being inflated by the USA intentially in order to impose a "poor mans" tarriff on EU governments subsidizing their goods and services. WTO does not allow a tarriff, but it does allow for a good old fashioned currency manipulation.


9 posted on 02/19/2005 1:33:52 PM PST by longtermmemmory (VOTE!)
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To: NEBUCHADNEZZAR1961

part of the goal of the euro-currency-ization of the EU was tax and WAGE harmonization. IOW all EU would have the same costs of living and minimum wages.

Instead the poor or less incomed (because you could earn less and live quite comfortably in some countries) has lead to grass roots inflation.

Every day items have been rounded UP to the most whole euro. This means pensions which are based on the OLD currencies are unable to pay in the new euro currency ecconomies.

Of course the eurozone is dominated by socialists who want to continue increasing taxes and regulating charges which means their ecconomies stagnate more.


10 posted on 02/19/2005 1:39:41 PM PST by longtermmemmory (VOTE!)
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To: longtermmemmory

I think that’s probably as good an explanation as any.


11 posted on 02/19/2005 2:20:22 PM PST by elfman2
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To: Maynerd

The Euro soviet 5 year plan was supposed to "bury us". Nikita Kruschev couldn't have said it better.


12 posted on 02/19/2005 3:40:08 PM PST by glorgau
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To: sgtbono2002
why do people place value on the Euro when the economies of the main countries backing it are so bad?

The Euro at it's inception was set to be worth more than the dollar (my thing is bigger than your thing syndrome), and it has appreciated about 10% since its introduction.

The US is running a large trade deficit which is one reason and the other is for diversification (don't put all your eggs (money) in one basket (dollars))

13 posted on 02/19/2005 6:58:56 PM PST by staytrue
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To: NEBUCHADNEZZAR1961
Look what that dream has become! A nightmare!!!!

The nightmare is because of a huge welfare state, not free trade or a single currency.

14 posted on 02/19/2005 7:01:25 PM PST by staytrue
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To: staytrue
The nightmare is because of a huge welfare state, not free trade or a single currency.

Nice try. The problem is that Europe, before and after the EU enactment was a welfare state. The FT's told us that the spreading of free-trade thoughout Europe would bring a wave of prosperity, a promise predicated on the knowledge that Europe was a welfare-state. Just another Free-Trade promise not kept.

15 posted on 02/19/2005 7:17:36 PM PST by NEBUCHADNEZZAR1961
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To: NEBUCHADNEZZAR1961
before and after the EU enactment was a welfare state.

I agree, but before and after the EU enactment, EU growth lagged US growth. Ergo, I say the lack of growth in the EU compared to the US is due to the welfare state.

16 posted on 02/20/2005 8:16:30 AM PST by staytrue
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To: staytrue

But if FT was as promising as its advocates said it would be there should have been huge economic growth. We're not talking incrementalism here, we're talking about a massive experiment that has failed to deliver on its promises.


17 posted on 02/20/2005 8:36:59 AM PST by NEBUCHADNEZZAR1961
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To: NEBUCHADNEZZAR1961; Toddsterpatriot
The EU is the orgasmic dream of all Free-Traders. One currency, etc.

Hilarious. Even more so that the observation is thought to be serious.

18 posted on 02/20/2005 8:42:18 AM PST by 1rudeboy
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To: NEBUCHADNEZZAR1961
a massive experiment that has failed to deliver on its promises.

It has failed to deliver so far on its promise which are probably overrated. The EU is changing the way they do bookkeeping, but does not fundamentally change the countries involved and will not much be responsible for gain or loss. I think a single currency does make for more efficient trade and bookkeeping, but that is insignificant compared to the drag imposed by the welfare state.

19 posted on 02/20/2005 9:08:51 AM PST by staytrue
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To: longtermmemmory; sgtbono2002; elfman2
"The euro is being inflated by the USA intentially in order to impose a "poor mans" tarriff on EU governments subsidizing their goods and services. WTO does not allow a tarriff, but it does allow for a good old fashioned currency manipulation."
________________________

I can't speak to the USA purposely manipulating the euro since this is the first time I've heard such a theory but I think the euro is trading high against the dollar because the EU is being tight with their currency. This has placed them into a deflationary hole that further exacerbates an already bad situation. Here's more from Kudlow on that very issue:

http://www.townhall.com/columnists/larrykudlow/lk20041115.shtml

More Kudlow:

"For now, the real problem with the dollar is not so much that the Fed is too loose, but much more that the euro is way too tight. Just as with foreign policy, Old Europe has the monetary story wrong. The creation of new euros is way too stingy; it is in fact still deflationary.

Consequently, Eurozone economic growth has averaged a recessionary 1 percent in recent years, whereas the U.S. recovery rate has been 3.5 percent. America lowered tax rates, but the Europeans refused to do so. Top-heavy social spending and excessive regulating of business and labor markets also suppress Eurozone growth. In comparison with the U.S., not only does Europe not work, not produce, and not invest -- with terrible productivity to boot -- their monetary policy is scorched-earth deflationary. Old Europe has dug itself into a deflationary hole."
20 posted on 02/20/2005 1:25:47 PM PST by Mase
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To: sgtbono2002

That is why it will be very profitable to 'short' the Euro.


21 posted on 02/20/2005 1:33:20 PM PST by BillM
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To: Mase
" I can't speak to the USA purposely manipulating the euro since this is the first time I've heard such a theory "

I just took it as a reference to a covert weak dollar policy , but your explanation also makes sense. Europe may also be playing cautious with it’s currency so soon after its inception.

22 posted on 02/20/2005 1:49:31 PM PST by elfman2
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To: NEBUCHADNEZZAR1961
The FT's told us that the spreading of free-trade thoughout Europe would bring a wave of prosperity,

Who are these imaginary FT's you keep quoting? Put down the pipe and step away from your keyboard. LOL!

23 posted on 02/20/2005 3:26:11 PM PST by Toddsterpatriot (Protectionism is economic ignorance!)
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To: NEBUCHADNEZZAR1961; staytrue
But if FT was as promising as its advocates said it would be there should have been huge economic growth.

You're confusing free trade with a common currency. The EU thought a common currency would expand trade. They were probably correct. Unfortunately for them, the massive regulation they added on everything from fruit content in jelly to food labeling to anything else to do with any product has more than destroyed any boost they might get from a single currency.

You thought NAFTA was a lot of paperwork, it's nothing compared to new EU regs.

24 posted on 02/20/2005 3:34:02 PM PST by Toddsterpatriot (Protectionism is economic ignorance!)
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To: Kitten Festival

the biggest problem is that EU created barriers for business creation instead of being a catalyst. Now people have to abide by 4 regulations instead of 3 nation/state/local with eu standard on top. The thought was that Eu standard would streamline into one nationwide standard instead of becoming another hurdle. Furthermore the extra layer of beuracrats hasn't helped at all. This extra layer of usuless power makers just creates more tension and less ability to come to terms with each clique trying to get its own way.


25 posted on 02/21/2005 11:38:24 AM PST by eluminate
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