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Portfolio > Economy & Markets > Economic Trends

After five years of crisis, the euro area risks Japan-style recession

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Five years ago, during the first year of the economic recession, policymakers looked to Japan’s “lost decade” for lessons. Three steps seemed necessary to avoid Japan-like stagnation: act fast; clean up balance sheets; and provide bold economic stimulus. America and Britain acted quickly, but their actions and outcomes have been mixed. 

Two main concerns remain. The fiscal stimulas may not have been enough to get the economy back on its feet, especially as deficit cutting has spurred governments to reduce spending. Second, the long-term costs of government bailouts are troublesome. American and Britain have or had large stakes in a variety of companies that may be unproductive and better left to bankruptcy. Things are even worse in the overall Euro zone.