Resolving Europe's Economic Dilemma Will Require More Than Sleight of Hand
U.S. President Harry S Truman, weary of hearing his economists conclude "on the one hand, but then on the other hand," famously asked for a one-armed economist. He's fortunate he never found one. For any economist who feels certain about his reading of the economic tea leaves, who sees no "other hand," is, to put it mildly, more than a little overconfident.</br></br>All by way of excuse for this attempt to figure out just what is going on in the European Union and euroland.</br></br>On the one hand, things are brighter than they were last year, when the areas' economies were contracting at a rapid rate. No one is expecting that dismal performance to be repeated this year or next. But on the other, neither is anyone expecting anything like satisfactory growth. The Economist Intelligence Unit is guessing that growth will be at an annual rate of 1.0% and 1.1%, this year and in 2011, respectively.</br></br>The move out of recession is the result of an increase in exports. On the one hand that's good news: Otherwise, the EU economies would continue to shrink. But on the other hand, some of the increased exports, especially those from Germany to other euro-zone countries, are exacerbating serious imbalances. Germany's trade surplus with its EU partners is causing serious problems, especially for the struggling periphery countries.</br></br>"Germany's...trading partners cannot sustain deficits forever," notes the Economist.