Friday, December 12, 2008

EU Stimulus Package Approved

Angela Merkel in the end decided to go along with the Brown-Sarkozy plan of 200 billion euros in stimulus, about 1.5 percent of GDP. This is smaller than the expected US package, but Europe has a larger share of welfare state spending, hence more in the way of automatic stabilizers than the US. Now we'll see what happens. With the failure of the auto bailout plan in the US Senate, don't expect the European announcement to halt the slide in the US stock market.

ADDENDUM: Or maybe all is not what it appears to be: according to Die Zeit, Merkel promised no more in Brussels than she had in Berlin.

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