Europe: A Very Sick Pa­tient

Politi­cians have killed the re­gion’s busi­ness cy­cle, ar­gues Enzio von Pfeil

Hong Kong Tatler - - Tatler Focus -

Taxes and reg­u­la­tions are stran­gling in­vest­ment in Europe n march 10, the Euro­pean Cen­tral Bank (ECB) an­nounced three mea­sures pur­port­edly de­signed to com­bat Europe’s de­fla­tion and thus stim­u­late her econ­omy: even more quan­ti­ta­tive eas­ing, more in­cen­tives for banks to lend and even-lower in­ter­est rates.

But the ECB is bark­ing up the wrong tree: de­fla­tion and thus stunted growth are symp­toms, not causes, of Europe’s ill health. The cause of stunted growth is that politi­cians have cre­ated a wel­fare mu­seum. Here are some of this mu­seum’s “spe­cial ex­hi­bi­tions”: it is tough to fire em­ploy­ees, taxes are pro­hib­i­tive, and reg­u­la­tions on a na­tional and EU level stran­gle any busi­ness in­cen­tives.

No won­der no­body wants to hire peo­ple—what’s the point? But if peo­ple don’t get hired and thus con­sume, then why should com­pa­nies in­vest? And if com­pa­nies don’t want to in­vest, why should banks lend? All of this means that politi­cians have killed Europe’s busi­ness cy­cle, so how can com­pa­nies make money?

“Don’t com­pound the is­sue by avoid­ing the prob­lem” is an old psy­cho­log­i­cal maxim. Europe’s politi­cians must pay heed to this; the ECB must stop en­abling their vote-get­ting profli­gacy.


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