Tuesday, April 14, 2009

The Down Turn: Europe and the US

Yes Yanks do not have the pension liabilities that the Europeans do and generous social programs leave Europe vulnerable if tax revenues go down.

However, far from being hindrance to recovery generous unemployment benefits in Europe help protect European real estate and credit markets, serves as an economic stimulus and generally prevents things from snowballing out of control. Specifically such payments insure that those most unlikely to default on their loans, mortgages for example, do not and serves as an economic stimulus by putting money into hands of those most likely to spend. Europe’s social safety net also means that Europeans are better positioned to weather the storm in other ways. Indeed, not only has such a safety net resulted in European families having more savings, fewer debts and fewer expenses than American families, because the state provides many services that employers provide in the US, Europeans that lose their job do not face rising costs -- health care being the most notable -- associated with unemployment in States.

No comments: