New York Times
October 10, 2011
Is the European economy heading for a recession? The answer is: yes and no. There is not one answer, because there are three distinct patterns emerging. First are the small countries that need to be rescued. Some of them are already in recession. Second, there are some larger countries that are showing sluggish-to-moderate growth. In this group are Italy and Britain, which is in a somewhat different situation because it is not a member of the euro zone. These countries need austerity measures, structural reforms or both — meaning that in the near future they will not be growth engines. The third category is countries recently enjoying a strong upswing. The biggest among them is Germany. France is currently somewhere between the second and the third group, but clearly tending more to the third one.
Whether Europe is heading toward a recession will be decided mainly by the third category of strong countries. Here Germany is a key player. Is Germany strong enough to prevent a recession? The domestic development is quite healthy at the moment. In contrast to many other countries — especially to the U.S. — unemployment is exceptionally low and fell again in September. Fixed capital investment is also strong.
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