The economic plights of the USA and the EU (European Union) offer the same problems with different solutions being used to overcome them.  The problems are high unemployment rates, (11% for the EU and 8.2 for the USA), high government deficits and resulting rapidly increasing public debt.  But these are just the symptoms, the hard, cruel reality is stagnant economic growth, the EU at an average 1% and the USA at 1.5%.  Both need at least a 3% growth rate to overcome the symptoms.

While the problems are the same the remedies are  basically different.  In the USA President Obama continues to resort to the traditional “Keynesian” remedy of “pump priming” funded by rapidly rising federal debt.  In three short years Obama has racked up an increase of $5 trillion plus in increased federal debt.  It took “”W” eight years to do this.  And Obama’s offer, if reelected, is more of the same.

The EU is following a different path basically laid down by its  central motive force, Germany.  The Germans reacted to the worldwide economic slump by cutting government expenses and encouraging the same for the private sector.  It also got the work force to accept cuts in pay in the form of shorter work weeks, with a side benefit of maintaining more jobs than the slump would have normally supported, in other words instead of firing workers it cut hours so that four could do the time allowed for three.

The Germans are demanding the same cuts in other EU countries, e.g. Greece and  Spain, in exchange for providing funds to shore up their financial sectors at the rates German bonds obtain, 1% as opposed to over 6% for Spanish bonds.  While the German public accepted these cuts and job maneuvers, the Spanish and Greek people are up in arms and rioting in the streets.

The bottom line is that neither the Obama approach or the EU approach has yielded the desired result, economic growth at 3% or more.  The Germans are doing well at between 2-3% but the rest of the EU is doing so poorly the average for the whole unit is about 1%.    Obama’s campaign has yielded a a growth rate of  1-2% over the last three years.

As I have stated before, if you are in a hole the first thing to do is stop digging.  It is time to put aside the remedies used so far and create new approaches.  Otherwise,  we will be doomed to another collapse at worse, or a stumbling, lackluster economy in both the EU and the USA at best.