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Europe: Falling Behind

Europe: Falling Behind

(p.50) Chapter Three Europe: Falling Behind
The Power of Productivity
William W. Lewis
University of Chicago Press

This chapter presents an analysis of the European economy. Europe is a very important piece of the global economic landscape. Taken together, the countries of the European Union have an economy roughly equal in size to that of the United States. Europe and the United States together account for about half of the total GDP of the world. Most of the countries of the European Union now have a common currency. Entry into the monetary union carries conditions on fiscal policy about deficit financing and total debt levels. Thus, much of macroeconomic policy in Europe is harmonized. The ability of the European Union to discipline members not conforming to fiscal policy and whether that policy is flexible enough is currently being tested. Also being tested is whether one monetary policy can accommodate the different rates of growth among the members of the monetary union.

Keywords:   European economy, European Union, common currency, fiscal policy, monetary policy, macroeconomic policy

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