The ‘global saving glut’ à la Bernanke is not a serious problem for a large group of high-income countries considered collectively. More importantly, taken together these countries exhibit a tendency for a growing GDP share of private-sector saving and a falling GDP share of private investment. Given prevailing tendencies regarding income distribution and gross capital formation, the private sector of developed countries considered collectively is prone to accumulating ‘saving gluts’ which is reflected in persistent public-sector financial deficits. Fiscal policy may need to support growth with the debt-financed income injections more or less permanently, and not just in response to ‘cyclical’ growth slow-downs or occasional recessions.
In this paper it is argued that European integration has not fulfilled its chief economic promises. Output growth has been increasingly weak and unstable. Productivity growth has been following a decreasing trend. This sorry state of affairs is likely to continue. However, this outcome is not unavoidable. Moreover, the negative consequences implicit in the current architecture of the common currency could be neutralised. For this to happen, the basic paradigms of the economic policies to be followed in the European Union would have to be radically changed. First, the unconditional fiscal consolidation provisions still in force would have to be repelled. Second, ‘beggar-thy-neighbour’ (or mercantilist) wage policies would have to be ‘outlawed’.