Perspectives for CESEE Countries
Edited by Ewald Nowotny, Doris Ritzberger-Grünwald and Helene Schuberth
Chapter 5: Fighting balance sheet recessions: a Japanese lesson for the euro zone
After the years of economic stagnation since 2008 and an alarming fall in inflation rates, some European policy-makers are beginning to pay attention to Japan’s experience of a ‘lost decade’. This is in sharp contrast to the Obama administration in the United States (US), which recognized within the first two years of the global financial crisis that the US was suffering from the same kind of balance sheet recession that had plagued Japan and managed to steer clear of its dangers by fully utilizing lessons learned from Japan. This chapter argues that once the European predicament is understood to be a case of balance sheet recession, it will become clear that the crisis can be resolved with two modifications to the structure of the euro without resorting to an injection of German taxpayer money or additional monetary easing by the European Central Bank (ECB), including quantitative easing.
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