November 10th, 2011
03:30 PM ET

Europe's real problem: Lack of growth

By Fareed Zakaria, CNN

I was in Germany this week and the mood there is pretty grim: Europe is facing its most severe challenge since 1945. If the Greek crisis morphs into an Italian crisis - Italy being too large to bail out - the entire structure of post-World War II Europe could unravel.

Finally, European leaders seem to recognize that their strategy of kicking the can down the road has not worked. The result will not be a dramatic solution - that is not how Europe works - but, more likely, a series of steps that together will be more comprehensive than anything done before. But they will not address Europe's core problem: a lack of growth.

The Europeans - by which I mean the Germans - are trying to find some solution to this crisis that will not let countries like Greece and Italy off the hook. Germans feel these countries need to feel the pressure - only then will they reform their budgets and their habits. So the solutions will be complex - trying to stop a crisis while not bailing out these countries entirely.

The real problem - however - is not so much that Greece has been unwilling to make sacrifices. It has made many. But Greece's budget numbers look bleak because its growth forecast looks bleak. It needs to address a much larger question of competitiveness. What can the Greek economy do to attract capital and investment? And at what wage levels? These are questions most European countries will need to answer to fully solve their problems.

Italy's economy has not grown for an entire decade. No debt restructuring will work if it stays stagnant for another decade. Even Germany is not immune, with an average growth rate of only 1.5%. German officials know that with a declining population, in five to seven years the country is likely to grow at an annual rate of just 1%. That's not much of an engine for Europe.

Europe needs a crisis agenda to get out of its bind, but beyond that it needs a growth agenda, which involves radical reform. The fact is that Western economies - with high wages, generous middle-class subsidies and complex regulations and taxes - have become sclerotic. Now they face pressures from three fronts: demography (an aging population), technology (which has allowed companies to do much more with fewer people) and globalization (which has allowed manufacturing and services to locate across the world).

If Europe - and, for that matter, the United States - cannot adjust to this new landscape, it might escape this storm only to enter another.

For more on this, read my column in The Washington Post. For more of my thoughts throughout the week, I invite you to follow me on Facebook and Twitter and to bookmark the Global Public Square. Also, for more of my takes, click here.

soundoff (366 Responses)
  1. DanE

    Maggie Thatcher defined the issue very succinctly: "The trouble with socialism is that eventually you run out of other people's money." The socialists may actually have to start working for a compensation package that reflects the market value of their labor. When that happens, you'll see economic growth return to Europe.

    October 16, 2011 at 6:30 pm | Reply
    • jch

      Capitalism also relies on other people money, it is called customers.

      October 16, 2011 at 8:40 pm | Reply
      • D Egan

        The difference is that one is a voluntary exchange of assets while the other is a forceable taking by government. Of course that assumes the government doesn't force you to buy a particular product, as would be the case with Obamacare.

        October 17, 2011 at 11:37 am |
  2. Appalled

    I don't like you.

    October 16, 2011 at 6:31 pm | Reply
  3. Dino Bodra

    Mr. Fareed: I think you are starting to sound too much like some "economy experts" who are obsessed with GDP. It has been shown time and time again that GDP is an obsolete, simplistic way to measure economic success. Yes, things in Europe are a mess right now and so they are in many other parts of the world. Is this not the result of unchecked, constant, perennial economic growth? Perhaps, wouldn't you consider, this mess we are seeing now is the natural collapse of this model based on unending economic and population growth. Instead of imagiing futures where even more growth is needed (at what cost, for God's sake?), why not imagining futures where we embrace downsizing and living more modestly? Perhaps you are too young to still recognize this and part of the problem is that younger generations need to listen to older generations (not the other way around, as it has been the model of modern western societies their CNN's).

    October 16, 2011 at 6:38 pm | Reply
  4. Richard Yarnell

    II heard your bit on a techno fix that, you claim, will help feed not only the already starving, but the additional 2 Billion expected in the coming 40 years. Then you claim that Europe's problem is too little growth. The issues are related.

    The former: cell phones may help farmers take their crops to market but they won't grow much more. Deteriorating soil, llack of water, use of inappropriate crops, mono-cropping that invites pests, all these factors will limit production no matter whether middle men are taken out of the supply chain.

    As for growth: we can't afford more growth. It's high time we look for another economic measure that recognizes there are limits to the capacity of the planet to support us.

    II'm sure people will say we're no where near the limit, that techno fixes will make it possible for us to deal with 9 Billion and then even more. But at what cost? Are we to celebrate big numbers and ignore the suffering already rampant and sure to get worse as population grows?

    II hope you'll give some thought to the quality of life to come as world population grows. At some point, nature is going to rebel and find a means to eliminate a lot of us. Whether it's wide spread drought, the almost certain consequences of climate change, inevitable agricultural failure as we deplete the soil and suck the water out of aquifers that it's taken millenia to charge, the unpleasant consequences of over-crowding, pestilence, or the lack of resilience that our displacing the wide variety of organisms on which we depend for our own vigor, we're in imminent danger of crowding ourselves out of existence..

    II'll go one step further: reducing the rate of (population) growth isn't enough. We must begin now to reduce population back to levels that are truly sustainable. If we don't, the sad end our short sighted and selfish civilization will meet will be painful both painful and deserved. The earth will recover or at least go on, but without us.

    I[I don't twitter or tweet. It seems to me that if you're going to do commentary then your listeners should have a positive and reliable means of responding to you. I've never been fond of these public forums which so often end up in flames.]


    October 16, 2011 at 8:25 pm | Reply
  5. Bobbert

    What little respect I had for this guy has been lost with his hyperbole, seriously, the "worst crisis since 1945"? Are you THAT ignorant of European history? The threat of nuclear war, the Berlin Wall, Berlin air lift, etc. were all MUCH worse in absolute terms than this debt crisis. This guy just talks out of his rear end and expects us to listen.

    October 16, 2011 at 9:38 pm | Reply
  6. Runarc

    There may be a economical effect here that i haven't heard of, but why exactly must a country mostly saturated with technological innovation (productionwise) and a declining population have total GDP economical growth?

    It makes little sense unless the welfare of the people in the country itself has to increase by significant amounts.

    One could argue that a sustainable exonomical footprint for western Europe and the USA is wishable (Co2 emissions, resources and technological saturation being the main issues here) while the developed world catches up in terms of economical wealth per person (aka GDP).

    October 16, 2011 at 9:41 pm | Reply
  7. David Doney

    Economies are built one job at a time and developed countries have been ignoring this for 20 years at their peril. As long as corporations in developed countries are free to source their labor in cheap, developing countries, wages and employment will stagnate or decline along with the living standard. We need to fundamentally re-visit globalization. The developed countries could trade amongst themselves until the living standards of developing countries rise sufficiently to avoid gutting their middle classes. The gigantic trade deficit developed countries have forces them to borrow from these developing countries, which was a major cause of the crisis in 2008. Governments are now trying to carry the load while consumers de-leverage (save to pay down debt). This also is unsustainable.

    October 16, 2011 at 9:59 pm | Reply
    • JohnLI

      Yes well if we permit the corporations to take advantage of global imbalances it's our own foolishness and our own fault. As great of a leader as Clinton was I never agreed on any need for globalization, it's only destroying the country. It does you no good to save 50 cents on a lamp shade at Walmart if it costs you your job.

      October 17, 2011 at 4:39 am | Reply
    • Occupado

      I've got a better idea. Export the West's labor unions to China. See how fast the jobs come back.

      October 27, 2011 at 11:10 am | Reply
  8. Uhmu

    Yea, but for that we need money and we can't lend money with normal interest rates. How do you suppose we invest into the economy when there is no cheap money in sight?

    October 17, 2011 at 4:28 am | Reply
    • Occupado

      Money for nuthin.... and your chicks for free.

      Someone oughta write a song.

      October 27, 2011 at 11:29 am | Reply
  9. Amit-Atlanta-USA

    A majority of Mr. Zakaria's articles SMACK OF TURN-COAT JOURNALISM....and this one is no different given that Mr. Zakaria has developed this UNCANNY HABIT of swaying which ever way the wind blows to establish his credentials as an authority! Not long ago Mr. Zakaria was lifting sky high the German economic juggernaut praising everything from export orientation, pride in Made in Germany symbol, and MOST IMPORTANTLY Germany’s track record of importing hundreds of thousands of immigrant workers to fill the labor demand (mainly from Muslim Turkey), even as America and & much of Europe were sliding into a recession. We saw Mr. Zakaria asking America to emulate the very same model, and now he suggests everything is going wrong there.

    He also has this uncanny ability to IMPLANT certain thoughts in readers minds even if her never directly talks about those issues ONLY to come back with a full blooded report on that later. One of his favorites (& in line with his GLOBAL AGENDA) is the issue of MUSLIM MIGRATION INTO EUROPE & eventually AMERICA.

    October 17, 2011 at 9:34 am | Reply
    • Amit-Atlanta-USA

      Part 2:

      He mentions that Europe is facing a demographic threat, which is absolutely true, but the RECIPE for that is NOT IMPORTING HORDES of WELFARE DEPENDENT, UNADAPTABLE Muslim migrants or letting in 10's of thousands of ASYLUM SEEKERS gate-crashing into Europe. These new migrants whose population is growing at 10 TIMES THE NATIONAL AVG, even as the local WHITE POPULATION IS ACTUALLY DECREASING, is ripping apart Europe’s delicate social balance even as they are A HUGE DRAG ON EUROPE’S DWINDLING RESOURCES.

      Even as we can't blame these new unadaptable immigrants for all of Europe's current economic woes, what is SURELY & IRREVERISBLY happening, as Mark Steyn and others have predicted, is a EUROPE IMPLODING FROM WITHIN by destroying FOREVER EUROPE's ABILITY to handle such crisis in the future.

      October 17, 2011 at 9:36 am | Reply
      • Paul

        Totally agree with you. Read my post down below too.

        November 12, 2011 at 6:30 pm |
  10. Justin#Case

    Our poor Greece is buying 4 new French made frigates for the navy, over 400 million dollars a piece, and 400 M1 Abrams tanks from USA. Confusing – ain´t it?

    October 17, 2011 at 2:37 pm | Reply
  11. James

    The real problem with Europe is that is democracy. No-one can enact tough choices because everyone has to have a fair say. Don't mind if you have capable people at the top. Most politicians are useless – just there to please the voter, not take long term strategic decisions and follow them through.

    October 17, 2011 at 3:19 pm | Reply
    • Occupado

      So if I understand your post, what we all need is a good dictator.

      October 27, 2011 at 11:09 am | Reply
      • Mike

        The most efficient form of government is a truly benevolent dictatorship. The problem is that there is only one person that I would trust to be the dictator, and honestly, i really dont want the responsibility !

        November 12, 2011 at 11:09 pm |
  12. rcjinvegas

    Mr. Zakaria your idea of Greece growing its way out of it's debt problem sounds good but here's why it won't work: The public and private debt of Greece is currently about 250 percent of the Greek GDP. Additionally, the Greek Government is currently spending about 15 percent of it's GDP just to pay the interest on the debt that they owe. There's almost no way the Greek government could grow their economy large enough or fast enough to meet such an enormous debt obligation. Stylistically, you are a wonderful essayist and writer Mr. Zakaria, but you are a terrible ( and in some cases deliberately dishonest) researcher. Your "insights" are typically shallow and in some cases misleading. Once again you have absolutely no idea what you are writing about.

    October 17, 2011 at 3:44 pm | Reply
    • Amit-Atlanta-USA

      You are absolutely right on Mr.Zakaria.

      He seems to be focused more on the numbers game, to keep churning in as many articles as possible on everything under the sun just to stay in the limelight.

      While in today's digital age most data is available to anyone, it does take a bit of effort and understanding to logically put them together to present a sound analysis. What Mr. Zakaria excels in is making desparate statements, often times having no semblence to each other, or as you said very rightly, arranged to portray his pre-determined thinking by basically cherry picking facts.

      While Mr. Zakaria's writings seems to appeal to a lot of people seeking rudimentary knowledge of events, very rarely does he portray any level of depth/authority to benefit knowledgeable people.

      Also check out my resp. above.

      October 17, 2011 at 4:32 pm | Reply
  13. Roland

    I believe Europe's economy is tied to US economy. If Europe helps tame US dept problems. Europe dept problems and economy will follow.

    October 18, 2011 at 1:49 am | Reply
    • Occupado

      Capital idea! Tax the Europeans and use the money to bail out California. What the heck. They still owe us for World War II.

      October 27, 2011 at 11:07 am | Reply
  14. European

    This man is dangerous. He is commited to make the West just like India. His solution always focus on the "generous" benefits of middle class. He forgets that Germany is in much better shape than US which offers few benefits. And he forgets that for most of the 20th century, China and India weren't part of the global economic map. Free trade is good as long as you have a comparative advantage. When people like him try to put Western workers against impoverished ones in Asia, free trade is a disaster. The myth that we live in a post industrial world can't cover the truth. Innovation is good but employees relative few bright people. The jobs actually come through the application of innovation and IT in the industry. This is where people can find jobs. The southern Europe doesn't need to follow his "brilliant" advice. They shouldn't focus on labor cost making their countries little Indias to attract capital. They should follow instead the German example , strengthen their industry and increase output instead. Germans have the strongest Unions in the world based on the German concept of co-determination. The Union leades in corporations have almost half of the seats in corporate boards of directors involved in all company decisions-from employee benefits to CEO compensation. This is why Germany keeps jobs for her citizens, has a strong industrial sector, and the salary gap between workers and CEOs is much more narrow compared to US. But Zakaria will never talk about this aspect of the German economic model. It doesn't fit his agenda!

    October 18, 2011 at 3:11 am | Reply
  15. David Helmer

    Advanced economies are currently being crushed by debt.
    There is a failure of vision when it comes to addressing this issue
    and all the current wailing and gnashing of teeth will not solve this fundamental
    problem. Only a new vision and economic course for humanity will save capitalism
    and its resulting freedoms. In reality, I believe this debt can no longer be addressed short of bankruptcy, debt forgiveness or a revolutionary funding mechanism on an international scale. This is not as impossible as it sounds. The amounts currently owed are simply too massive. Societal breakdown is already starting to occur as a result of current insufficient action. We are already witnessing the beginning of these upheavals here and abroad. Far left and far right swings can result in larger catastrophe as history has painfully shown.
    An actual solution for example would be the formation of a world body to create a new and totally separate international reserve currency that would be financed
    with the issue of 50 to 200 year bonds and large enough amounts to issue debt forgiveness at least in the form of extremely long term loans on massive portions of member countries current debt. The problem is not pushing money owed on to future generations but creating a vehicle to push it far enough and in large enough amounts to actually carry the desirable parts of capitalism to highly productive outcomes. These funds would be issued in increments to each country as realistic austerity measures were implemented and verified, but at a pace that would not cause the catastrophic failures that we are all currently headed for. This would also allow infrastructure to grow and improve, valued social programs to continue and hope for future generations now in jeopardy. Perhaps infrastructure and medical system support funded by this reserve currency is possible as well and let out in amounts as verifiable progress was being made. There are a number of ways to get this currency funded but this would be much more involved than could be discussed here and is a separate albeit critical component of this concept.) The challenge beyond the omnipresent naysayers of course is to use our creativity to take the mess we have and design a way out of it. This is not impossible to do but the conversation needs to get started. I hear no voices discussing methods of true advancement in world economic solutions. For example, why can the International reserve currency mentioned above not exist with the current one we now use but be separate and controlled by a third body not private or public but a universal and neutral board to address this massive problem alone? There is an obvious need to not rock the existing apple cart too harshly but yet provide a solution that will not let capitalism fail. Democracy and free markets are the best hope man has but they are prone to abuse from time to time. Freedoms largest requirement is personal and collective responsibility that can fail at times as it has recently. The world needs a larger vision mechanism to reset problems we now have, may yet face and that provide productive citizens an opportunity and path to the future.

    October 18, 2011 at 8:17 am | Reply
    • Occupado

      Just what we need, another world body - as feckless as the UN?

      October 27, 2011 at 11:05 am | Reply
    • YounanMarketingAndManagementAssociatesInc,Int'l Intst'r

      is it because of you and your natzi workings that my postings keep getting obstructed and my file on the internet got sabotaged in record keeping so that after you extorted education on various study and writing you could show up as the main smart guy instead of me being where i belong and earned and have rights to contantly in addition ot huge payment for everything used. and abuses that went with it. is it you trying to move into the main commentator analyst journalist position? why do i hate so much.and who are you exactly where were you living these past 30 years or more each time?

      November 12, 2011 at 11:18 pm | Reply
  16. m.s.mohamed ansari


    M.s.mohamed ansari

    All press and media Arabs leader and G20 leader under control by A TO Z + 8
    QUEEN + 8
    Royal wedding cost. 10 generation total $ 57 trillion
    Each every politician rolling 8 years only
    But queen family enjoying 10 generation

    GLOBAL ECONOMIC FALL REASON WAR. Improve economy Only peace and prayer

    I am also happy kill osma bin laden
    Turing point of global economy. Islam not allowed Terries Terries people not for Muslim
    1. Please avoid war. Day by day war cost increase $ 3.5 trillion
    2. Global economy in crisis
    3. International job less
    4. Global financial crisis financial crisis for every manufacture
    5. Every Day OPEC Oil Price Increase
    6. World poverty problem
    7. Each every single man effected
    8. Ignore future death million of already death
    9. Million of people wounded
    10. Global environment climate will be change this will lead global agriculture problem


    From. Mr.M.S.Mohamed Ansari,
    154, Angappa Naicken Street,
    Chennai – 600 001.
    Tamil Nadu,

    To , The Hon’ble Chief Justice,
    The Supreme Court,
    United States of America,
    Washington, D.C.
    Fax no: 213.547.8080
    Dear Sir,
    Sub: Prosecution of previous President Mr. George W.Bush, for violation of International Code of Conduct.
    Mr. George W.Bush, the previous President of United States of America, initiated a war against IRAQ, without obtaining the previous sanction of United Nations Organization (UNO) on the pretext of having nuclear weapons, even though the then IRAQ government openly exhibited to the whole world that it has no nuclear weapons.
    According to the CNN WORLD report, in the war 6, 75,000 civilians killed, 7500 troops of USA and its allied forces killed 3 25 000 people wounded and $ 3.5 Trillion Dollar spent for the war. This spending of $ 3.5 Trillion Dollar is the main cause of action for the present economic crises prevailing all over the world.
    After winning the war against IRAQ, the United States of America’s President Mr. George W.Bush, also admitted the same fact, and he openly stated that the Intelligence agency misguided him.
    Later on, even the United Nations Organization (UNO) also certified that the IRAQ has no nuclear weapons.
    Then it is the bounded duty of the United States of America and its allied forces to withdraw from IRAQ.
    But instead of withdrawing from IRAQ, the United States of America and its allied forces formed a government in IRAQ, under their control and administered the entire IRAQ, and its peoples.
    This indicates a clear violation of duty by the President of United States of America Mr. George W.Bush and also a clear case of violation of the International Code of Conduct for UNO members.
    Thus Mr. George W.Bush attracts prosecution for the above said offence.
    Thus I hereby pray this Hon’ble Court initiate criminal proceedings against Mr. George W. Bush, and give him maximum punishment for
    a) initiating the war against the IRAQ
    b) killing its innocent IRAQI peoples
    c) Killing troops of USA and allied forces and
    d) The present economic crises.
    e) 3 25 000 people wounded
    Dated on this day of 13th day of April, 2009.
    Yours truly, (M.S.MOHAMED ANSARI)
    The Chief Justice, the International Court of Justice, The Hague, Netherlands.
    The Secretary General United Nations Organization
    The Chief Justice, the Supreme Court, IRAQ.
    His Excellency Mr.Barack Obama, the President of United States of America, White House, Washington D.C.

    October 18, 2011 at 10:19 am | Reply
    • Occupado

      I'm sure the Chief Justice of the US Supreme Court will get right back with you as soon as he logs on and reads your post.

      October 27, 2011 at 11:27 am | Reply
  17. zenshaman

    tell your boss mr.zakarias, that we are no longer slaves, and we arent your property. punks like you and your master have ruled this planet for thousands of years, look at the destruction, misery, and death you have brought. shame on you. I am a free man with rights given to me by my creator. you and your masters of death need to go away.

    October 18, 2011 at 2:03 pm | Reply
  18. Guy Macher

    Germany's population is not declining, only the native German population. Mass invasion by illiterate immigrants will ensure that per capita wealth will plummet.

    October 18, 2011 at 4:37 pm | Reply
  19. Eric

    Growth IS the problem.
    You can never sustain growth in any system.
    It's mathematically impossible.
    A growth percentage of 7% per year means a doubling every 10 years.
    That means the following:
    10 years: x2
    20 years: x4
    30 years: x8
    40 years: x16
    50 years: x32
    100 years: x1024

    Do you really think it is realistic to think that any system can sustain growth indefinitely?
    If a population would grow 7% per year in just 30 years the population would be 8 times the original.
    Same with economic growth. Or growth in average age, or in oil consumption, or any resource for that matter.

    Please, educate yourself. Watch these videos. And be prepared to be scared:


    October 18, 2011 at 8:38 pm | Reply
    • Amit-Atlanta-USA

      Absolutely excellent!

      While it's not rocket science, people like Mr. Fareed Zakaria are COVERTLY downplaying such scientific analysis to MASK the exploding growth of Muslim population in Europe (growing at 10 times the national avg.) even as the local WHITE POPULATION is headed in the OPPOSITE DIRECTION!

      Unfortunately excessively naive extreme liberals and leftists believe such analysis as ISLAMOPHOBIA!

      I would recommend everyone to read MARK STEYN's book "AMERICA ALONE: THE END OF THE WORLD AS WE KNOW IT" which details EUROPE's MUSLIM DEMOGRAPHIC TIME BOMB!

      October 19, 2011 at 2:17 pm | Reply
    • Amit-Atlanta-USA

      Check this scientific analysis by the New America Foundation on the demographic time bomb in Europe that strikes at the very root of this discussion about growth making it an impossible task to achieve !


      October 19, 2011 at 2:40 pm | Reply
    • CM

      Wish I'd read this before posting my own reply. I thought maybe I was losing my mind. I'm a bright guy, but there was no way I could be the only one to see the same thing! Growth is the enemy, it's the carrot dangled by the elite to keep us worked to the bone. They reap the benefits of any growth, while we pay the price if they overreach.

      November 11, 2011 at 10:19 am | Reply
  20. Amit-Atlanta-USA

    Posted the following incorrectly as a reply to another reader's response:

    I only now realized that actually the pic. in the article sums up whatever I have been talking about.... Europe's demographic time bomb due to hordes of WELFARE DEPENDENT MUSLIMS gatecrashing there, and Mr.Zakaria's own bias (& hidden Agenda!) in favor of his co-religionists.

    October 19, 2011 at 4:21 pm | Reply
  21. LBlack


    Do you realize the contradictions in the advice you gave on Sunday's show? First you said that the major financial problem in developed countries was a lack of growth; seeming to hint that more people would mean more consumers.

    Then in another part of the show you focused on population growth and the problems of feeding the oncoming population of seven billion people.

    Isn't the real answer that we have to decrease population growth and provide a workable financial system that doesn't depend on use of finite resources?

    October 20, 2011 at 1:47 pm | Reply
    • Occupado

      How to you realistically decrease population growth? Close the borders? Forced sterilization? Eugenics?

      October 27, 2011 at 11:04 am | Reply
  22. Partha

    Devalue the Euro.If the weaker nations cannot be given a separate though related currency (say the Greuro)
    and devalue that ,then no other solution can be sustainable.Give the Euro (or the Greuro) the same medicine
    that weaker economies world wide have taken with the full backing of the Eurozone.

    October 23, 2011 at 1:06 pm | Reply
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