From convoy to parting ways? Post-crisis divergence between European and US macroeconomic policies

Arbeitspapier

The response in 2008-09 to the global financial crisis was in many ways a high water mark for transatlantic policy coordination. The major economies of the EU and the US rapidly agreed on a series of measures to limit the crisis. However, the common approach has since unraveled. This paper explores why the 'London consensus' has not survived for much more than a year. We identify four non-competing explanations: (a) divergence in economic developments, especially the productivity response to the recession; (b) domestic political economy factors, notably the pressure to act against unemployment in the US; (c) differences in beliefs as regards the nature of the recovery from the common shock, about which there is much more supplyside optimism in the US ; (d) institutional factors such as the lack of a central fiscal authority in the EU. In response to this situation we suggest a critical quantum of coordination. Key measures include a commitment to avoiding deliberate currency depreciation and unilateral intervention; agreement to give the IMF an enhanced monitoring role; the adoption by parliaments of medium-term fiscal plans ; and cooperation on the issue of Chinese undervaluation.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Bruegel Working Paper ; No. 2011/04

Classification and Topics

• Classification: Wirtschaft
• Subject: Finanzkrise ; Wirtschaftswachstum ; Wirtschaftspolitik ; Geldpolitik ; Finanzpolitik ; Internationale Wirtschaftspolitik ; EU-Staaten ; USA

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Pisani-Ferry, Jean ; Posen, Adam S.
• Event: Veröffentlichung
• (who): Bruegel
• (where): Brussels
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/77981
• Last update: 10.03.2025, 11:45 AM CET