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On this one I am not sure. Krugman seems to want to compare the EU to the US and EU member states to US states. On fiscal policy, that's just wrong. The EU budget is 1% of GDP and it doesn't raise its own taxes. EU member states raise their own taxes and have independent fiscal policies (subject to the Growth and Stability Pact - but that was "relaxed" in November). US states at most collect sales taxes at a rate about 1/2 of EU VAT.

Well, the relative weakness of the EU is a valid argument. The EU states have presumably worked out the outlines of a stimulus plan among themselves, in terms of size, with a minor EU angle. The result will be a wildly divergent stimulus in terms of direction, with some implementation issues to boot.

The upside is that we're seeing more coordinated action in the EU than before, which is good for the EU in the longer run, and that the obstacles to collective action will save us from some of the more foolish decisions that the US seems to be making.

by nanne (zwaerdenmaecker@gmail.com) on Sat Mar 21st, 2009 at 08:28:41 AM EST
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