Skip to content

Comparing the Plight of the American and European Economies

November 5, 2010

While the euro continues to appreciate (see “Why Does the Euro Keep Rising Against the Dollar?”), that does not necessarily mean that the Eurozone economy is actually doing well.  As the graph below shows (from the Angry Bear blog), the U.S. economy is actually the closest to its pre-recession levels of the major economic areas—besides China, whose economy is still roaring.

At the same time, Eurostat has recently released its latest unemployment figures.  While the EU as a whole has the same unemployment level as the U.S., these statistics also show a bleak picture in many European countries.  In addition, there are four European countries that have unemployment rates higher than any American states.

Besides the economy overall and unemployment, another important economic issue in the November 2010 American elections was the size of the Federal government and government spending.  Compared to the Eurozone, U.S. spending does not appear to be large.  The 2009 U.S. Federal budget deficit would have been the fourth largest in the Eurozone, although at least one non-Eurozone country–the UK–had a larger deficit than the U.S.  The American debt is also relatively small compared to its European counterparts, as 11 of the 16 Eurozone members have larger debts (as a percentage of GDP, the U.S. Federal debt is the largest in the world in dollar terms).  In fact, the U.S. joins only six European countries that use the euro as being below the 60% ceiling that was a requirement to be a Eurozone member.

Of course, given that the U.S. has an independent monetary policy (as demonstrated by the Fed on Wednesday) and a floating exchange rate, the U.S. has more flexibility in dealing with its large deficit and debt.  Thus, it is not in the position that many European countries are facing where it must impose strict austerity measures, but at the same time, Europe can not depend on American spending to revive the global economy either.

No comments yet

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: