23 Jan 2008

Decoupling: Can Europe avoid a recession?

Daniel Gros

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On this side of the Atlantic at least, everyone is asking whether Europe will follow the US into a likely recession or whether it can ‘decouple’ from the American economy. CEPS Director Daniel Gros explores this delicate question by looking at how the eurozone business cycle has related to that of the US over the last ten years. The goods news, he finds, is that the eurozone should be able to avoid a technical recession and that employment growth is likely to remain relatively robust. The bad news is that any recovery might also be much slower in starting in Europe.