Jobless U.S. Might Take The World Down

Jeremy Warner Daily Telegraph October 12, 2010

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By Jeremy Warner, Assistant Editor Published: 7:40PM BST 11 Oct 2010

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IMF managing director Dominique Strauss-Kahn speaks at the Development Committee at the World Bank Photo: AFP/Getty Images

The destructive trade and capital imbalances of the pre-crisis era are back, banking reform appears stuck in paralysing discord, public debt in many advanced economies remains firmly set on the road to ruin, and the spirit of international co-operation that saw nations come together to fight the crisis has largely disappeared.

This was not where we were meant to be in tackling the underlying causes of the crisis and returning the world to sustainable growth. Yet beneath this sense of frustration at lack of progress â?? and at international organisations such as the IMF and the G20 to bring it about - there is an underlying truth that's often left unspoken; many of the problems in the world economy right now are not international at all, but US specific and can only really be solved by America itself.

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I don't want to belittle the difficulties faced by some of the peripheral eurozone nations, but in the scale of things they are a sideshow alongside the malaise which has settled on the world's largest economy.

Ignoring the troubled fringe, Europe as a whole is to almost universal surprise starting to look in reasonable shape again, and for reasons that I will come to, Europeans are in any case not nearly as fixated by high unemployment as their American peers.

What applies to the eurozone is also true of the UK. As in Europe, the dominant issue in UK policy is not joblessness, but unsustainable public debt. There's a real, and growing, trans-Atlantic divide in perceptions and rhetoric. And with good reason.

Europe had a much deeper economic contraction than the US â?? oddly, perhaps, given that the crisis originated in the US â?? but joblessness didn't climb nearly as steeply, and in the main eurozone economies is now falling again. In Germany, unemployment is already below pre-crisis levels.

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Columnists Kamal Ahmed Roger Bootle Tracy Corrigan Ian Cowie Edmund Conway Ambrose Evans-Pritchard Paul Farrow Richard Fletcher Liam Halligan Jeff Randall Damian Reece breakingviews.com Advertisement Advertisement Advertisement