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While America treats Europe like an ugly stepsister, it worries about economic forecasts.
LONDON, U.K. — Pity poor Europe. We tell them, “thanks, but no thanks” after they offer to help us topple the Taliban in the wake of September 11, then we berate them for not wanting to throw their troops into the misguided Iraq War. Then we alternately vilify or lionize their universal healthcare systems for our own narrow political purposes.
Now, ahead of the G20 Summit in Pittsburgh, Washington is unhappy at European lobbying to curb excessive risk taking in the global economy. This argument is superficially focused on the question of whether governments should put a cap on bonus payments to bankers. France and Germany support this, and (deja vu!) the British agreed with us that it’s a bad idea.
The bonus debate may be the closest thing to drama in Pittsburgh, which will otherwise feature a lot of press conferences and boring joint communiques. Yet the old G7 economies — the U.S., Japan, and Europe’s major powers — enter this meeting quite divided over how to apportion blame for and how to navigate out of the global economic crisis. They disagree, too, on climate change, on stimulus policy and on how deeply to adjust international institutions like the International Monetary Fund and World Bank to the rise of China, India and other emerging powers. With the exception of Britain, Ireland and Spain — three European economies who, like us, built their economic houses of straw — the major EU economies look relatively good right now. Just as they didn’t grow quite as fast during the bubble, they haven’t declined as quickly after it popped. Thanks to social safety nets, for instance, they have more recession-proof societies (i.e., they had cast off fewer of the lessons of the Great Depression than America). Since regulation makes it harder for companies to lay off European workers, and because when they do families rarely wind up on the street, economic metrics look a bit better. As wise piggies, you might say, they built their houses of brick.
But economists see a problem in that analysis. In terms of joblessness, bankruptcies and GDP growth, most of the economies of the EU have fared a bit better (or a bit less bad, more accurately,) than the U.S. or Britain. But the long-term picture is dramatically different.