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The Economic Future of Europe


Olivier J. Blanchard


International Monetary Fund (IMF); National Bureau of Economic Research (NBER)

February 1, 2004

MIT Economics Working Paper No. 04-04

Abstract:     
After three years of near stagnation, the mood in Europe is definitely gloomy. Many doubt that the European model has a future. In this paper, I argue that things are not so bad, and there is room for optimism.

Over the last thirty years, productivity growth has been much higher in Europe than in the United States. Productivity levels are roughly similar in the European Union and in the United States today. The main difference is that Europe has used some of the increase in productivity to increase leisure rather than income, while the U.S. has done the opposite.

Turning to the present, a deep and wide ranging reform process is taking place. This reform process is driven by reforms in financial and product markets. Reforms in those markets are in turn putting pressure for reform in the labor market. Reform in the labor market will eventually take place, but not overnight and not without political tensions. These tensions have dominated and will continue to dominate the news; but they are a symptom of change, not a reflection of immobility.

Number of Pages in PDF File: 38

Keywords: Europe, growth, deregulation, goods markets, labor markets

JEL Classification: E6, L5, J6

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Date posted: February 10, 2004  

Suggested Citation

Blanchard, Olivier J., The Economic Future of Europe (February 1, 2004). MIT Economics Working Paper No. 04-04. Available at SSRN: http://ssrn.com/abstract=500183 or http://dx.doi.org/10.2139/ssrn.500183

Contact Information

Olivier J. Blanchard (Contact Author)
International Monetary Fund (IMF) ( email )
700 19th Street, N.W.
Washington, DC 20431
United States
202 623 7825 (Phone)
202 623 7271 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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