, as he understands the dangerous consequences of any protectionist drive in the present circumstances. in a spirited answer to some of his critics, he explained that his point was just a lucid reminder of good theory, saying : “ the result is not a spenglerian “ decline of the west ”, but rather a trend toward ( but not necessarily all the way ) to geographical equalization. bet for the future half century to be a repetition of what took place historically in the first half : continued growth in the advanced world but arguably at a lower see williamson, j., “ comment ”, in bergsten, f. ( ed ), international adjustment and financing : the lessons of 1985 – 1991, institute for international economics, 1991, p. 243. see samuelson, p., “ where ricardo and mill rebut and confirm arguments of mainstream economists supporting globalization ”, journal of economic perspectives, vol. 18, no 3, american economic association, 2004, pp. 135 – 146, and gomory, r. e. and baumol, w. j., global trade and conflicting national interests. mit press, cambridge, ma, 2001. rate ceteris paribus due partly to competing imitative inventions abroad. ” 7 in the same text, he warns that trade theory points to the need for actual redistribution to compensate the losers, a trend he considers to be heading “ … politically downward in our present - day democracies. ” among other factors, this has certainly contributed to the spreading of income inequality in our societies, a development that has led to increasing recourse to indebtedness by households. raghuram rajan, former imf chief economist, in his new book describing the policies that resulted in this development ( which won the 2010 financial times and goldman sachs business book of the year award ), includes a chapter entitled “ let them eat credit ”, a pun on the infamous marie antoinette quote. 8 the impossibility of continuing down the same route, now that all economic agents are deleveraging, generates enormous difficulties to improve growth prospects for all advanced economies. they may face the threat of a protracted period of low growth. only two things could prevent this : 1 ) the resolution of the global imbalances conundrum with increased demand by emerging countries ; or 2 ) a wave of technological innovations which create new needs and new markets. the possibility of a long period of mediocre economic growth,

rates and promoting r & d. the simulation results showed that by 2020 a comprehensive package of policy measures, encompassing both product market and labour market reforms, could lead to a 2. 2 % increase in gdp, compared to the base line scenario. employment levels could rise by about 1. 5 % over the same horizon. such an outcome would also greatly support the ongoing fiscal consolidation process. importantly, it would also seem that a swift implementation of such reforms would lead to immediate sizeable welfare gains already in the period up to 2015. 12 if europeans are to reap these potential benefits, it is clear that reform efforts by national governments have to be reinforced. it is therefore welcome that the eu - level targets under the europe 2020 strategy are being translated into precise country - specific targets to guide policy - making at the national level. moreover, the simultaneous review of member states ’ fiscal and structural reform policies in european fora prior to national decision making – the so - called european semester – to be introduced as of 2011 is likely to lead to stronger and more effective follow - up and peer pressure. an ambitious eu - level programme under the europe 2020 umbrella will complement actions at the national level. this includes : 1. completion of the single market starting in 2012, twenty years after the 1992 deadline for establishing the internal market ; 2. mobilisation of all available financial resources under the eu budget ; and, 3. development of a new trade and external policy aimed at improving global market access for eu companies. finally, the commission is currently rolling out seven so - called “ flagship initiatives ” targeting key policy areas of the strategy ( including innovation, education and competitiveness ) to complement national reform initiatives. 4. 2 macroeconomic imbalances these processes of globalisation and financial integration in europe have facilitated increased leverage and more advanced financial engineering, which has made it possible to advance future consumption and maintain citizens ’ standards of living in the face of shifts in global production and increased income inequality. regrettably, the latter phenomenon has see european economy 7 / 2010 : european economic forecast autumn 2010, pp. 57 – 60, european commission directorate - general for economic and financial affairs. not facilitated a smooth transition to a new equilibrium, but rather fed distorted expectations of growth among private agents, leading to excessive debt and risk taking, masking the need for economic adjustment to adapt to these global changes. the large scale deleveraging that began in 2007 reversed this trend and laid bare large fiscal and broader macroeconomic imbalance