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These policies would come back to haunt Europe in the aftermath of the 2008 collapse. Instead of the vigorous, countercyclical fiscal, monetary, and debt relief policies called for in the wake of a 1929-scale crash, Europe’s institutions promoted austerity reminiscent of the post–World War I era. The debt and deficit limits of Maastricht precluded strong fiscal stimulus, and the government of Angela Merkel resisted emergency waivers. Germany, an export champion, which in effect had an artificially cheap currency in the euro, profited from other nations’ misery. Germany could prosper by running a large export surplus (equal to almost 10 percent of its GDP), but not all nations can have surpluses. The European Central Bank, which reported to nineteen different national masters that used the euro, had neither the tools nor the mandate available to the US Federal Reserve. The ECB did cut interest rates, but it did not engage in the scale of credit creation pursued by the Fed. The Germans successfully resisted any Europeanizing of the sovereign debt of the EU’s weaker nations, pressing them instead to regain the confidence of capital markets by deflating. Sovereign debt financing by the ECB went mainly to repay private and state creditors, not to rekindle growth. Thus did “fortress Europe,” which advocates and detractors circa 1981 both saw as a kind of social democratic alternative to the liberal capitalism of the Anglo-Saxon nations, replicate the worst aspects of a global system captive to the demands of speculative private capital. The Maastricht constitution not only internalized those norms, but enforced them. The dream of managed capitalism on one continent became a laissez-faire nightmare—not laissez-faire in the sense of no rules, but rather rules structured to serve corporations and banks at the expense of workers and citizens. The fortress became a brig. There was plenty to criticize in the US response to the 2008 collapse—too small a stimulus, too much focus on deficit reduction, too little attention to labor policy, too feeble a financial restructuring—but by 2016, US unemployment had come back down to less than 5 percent. In Europe, it remained stuck at more than 10 percent, with all of the social dynamite produced by persistent joblessness.
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