Tags: Europe | Lost | Decade

Economists: Europe Should Brace for Lost Decade

Friday, 18 Nov 2011 01:46 PM

Austerity measures designed to prevent debt-ridden European governments from defaulting will have such painful side effects that the continent's economy is doomed to spend a lost decade of reduced living standards, economists say.

"These reforms are going to be devastatingly impacting on the population in these countries. We are looking at a decade of lost living standards across most of Europe. The austerity measures are part of the solution but they are also going to deepen the downturn," James Shugg, senior economist at Westpac, an Australian financial institution, tells CNBC.

Austerity measures in countries like Greece call for public-sector layoffs and budget cuts, and while such moves benefit one side of the ledger, they do result in less tax revenues for the government.
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Still, there's no other way out of the mess without austerity.

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(Getty Images photo)
"Europe needs to pull out all the stops and learn from its mistakes to ensure it can come through this with the least possible damage. There is no easy solution to this, it will be hugely painful," Shugg says.

The U.S. economy, meanwhile, is expected to make it through the current turmoil without dipping back into a recession.

A congressional supercommittee is studying ways to cut deficits by at least $1.2 trillion by Thanksgiving, although market watchers here aren't expecting anything great or anything horrible to happen if the committee comes to agreement or fails and allows automatic cuts to kick in.

"There's no doomsday scenario in reducing government spending," says David Kelly of JPMorgan Funds, according to the Associated Press.

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Austerity measures designed to prevent debt-ridden European governments from defaulting will have such painful side effects that the continent's economy is doomed to spend a lost decade of reduced living standards, economists say. These reforms are going to be...
Europe,Lost,Decade
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2011-46-18
Friday, 18 Nov 2011 01:46 PM
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