Wednesday, September 10, 2008

Europe Slashes Growth Forecasts for 2008

A nice macro article full of concepts and issues that you should all know is in today's New York Times. The academic year starts on Friday and I'll be reviewing and wrapping up macro the first couple of weeks with my kids (Candidates 2009). This article is not only interesting per se but careful reading will force you to check on what you remember from year 1. Just read below the first couple of paragraphs:
The European Commission on Wednesday cut its forecast for economic growth this year, conceding that a slowdown in the United States, expensive energy and a global housing slump were exacting a heavier price than was expected even six months ago.

With an embattled prime minister in Britain struggling with a housing market slide, a German government under pressure to enact an economic stimulus package and a French government whose spending is hamstrung by a ballooning budget deficit, the gloomy figures only added to a darkening political mood in Europe.
For example, why would a slowdown in the US contribute to a decrease in European growth?What's the role of expensive energy? Through what possible routes does a slump in housing exact a 'heavier price'? What could the 'economic stimulus package considered by the German government include? Why are 'balooning budget deficits' feared so that now France can't spend its way out of trouble? What are the risks? Why does Europe have constarints on government spending? How much sense do they make when euro member countries have no monetary policy to resort to? Can you see why distinguishing between the short run and the long run may be important?

Read the whole article here. It's worth your time.

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