Two sets of economic policies are available to attack these problems. One fundamental cause of the long-run problem is structural sclerosis. The consensus among economists and businessmen is that rigidity must give way to flexibility, and dirigisme must be replaced by private entrepreneurship. More controversial is the contention that structural change must be supported by a Keynesian stimulus. Deficit financing may also be needed, particularly in a deflationary environment or a downturn.
Economic time is less predictable.
And if economies turn down, further increasing unemployment, the EMU may be forced to move in directions alien to its inherited conservatism. The online version of this article appears in two parts. Click here to go to part two. Robert A. Levine is a senior economic consultant at the Rand Corporation. All rights reserved.