Euro-area growth falls fast

Final quarter GDP in the eurozone fell by 1.5% in the final quarter, the first contraction since records started being kept in the 1990s.   If our subprime market is the cause of this mess, how come they're suffering more than we are?

Well, for starters, it's not accurate to say that our subprime market is the simple cause of this.  Banks in most of the developed world were participating in the credit bubble, though what they invested in varied.  If it wasn't their own subprime bonds, it was ours, or emerging market debt, or some other species of unexpectedly risky asset.

The other problem Europe has is that their major economies, especially Germany's, have historically been heavily dependent on exports.  The biggest source of robust domestic demand growth has been the United States consumer, and that turned out to be illusory.  Unfortunately, Europe's relatively paltry stimulus efforts seem to indicate that they still, somehow, believe that the United States consumer can pull them out of it, which is insane considering how overleveraged we are.  Unless they can overcome the need for our consumer spending, they'll continue to suffer longer and harer than we do.

Presented by

Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register with Disqus.

Please note that The Atlantic's account system is separate from our commenting system. To log in or register with The Atlantic, use the Sign In button at the top of every page.

blog comments powered by Disqus

Video

What LBJ Really Said About Selma

"It's going to go from bad to worse."

Video

Does This Child Need Marijuana?

Inside a family's fight to use marijuana oils to treat epilepsy

Video

A Miniature 1950s Utopia

A reclusive artist built this idealized suburb to grapple with his painful childhood memories.

Video

Why Principals Matter

Nadia Lopez didn't think anybody cared about her school. Then the Internet heard her story.

More in Business

Just In