Europe: A Very Sick Patient
Politicians have killed the region’s business cycle, argues Enzio von Pfeil
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.