When the huge stock and real estate bubble burst in Japan in the early 1990s, most observers expected a necessary correction within a few years. More than a quarter of a century has passed, and the country still has not emerged from a deflationary spiral and sluggish growth, although the situation has improved somewhat in recent years. Does the same fate await the euro zone?
The parallels are striking. In August, the price index in the euro zone was negative, at -0.2%. The recession in 2020 is of course exceptional (- 8% expected by the ECB, the European Central Bank), but it follows a decade of very poor real growth per capita, around 1% per year, at the same level than Japan. As for interest rates, they have been zero or negative in Japan since 1999, and have followed the same trend in the euro zone since 2008, now at -0.5%.
Louis Boisset, economist at BNP Paribas, believes that the European situation is not yet so bad: “We are not in deflation in the euro zone. It is not yet a sustainable phenomenon. “ But he recognizes it: “The European situation makes one think of a ‘Japonisation’. Fortunately, there are solutions. “
- Repeated shocks to growth
In the 1980s, Japan experienced a major household and corporate debt bubble. Real growth is 4.5% per year, and the stock market is soaring. Towards the end of the decade, across the world, inflationary surges caused interest rate hikes, which contributed to the stock market reversal. The Japanese bubble bursts.
The phenomenon is quite common, and many countries, including Sweden, have rebounded after such a crisis. But the Japanese authorities do not react, not restructuring the banks asphyxiated by bad debts. The latter are slowing down their loans, stifling the recovery.
In 1997, another shock: the crisis from Thailand spread throughout Asia. Here again, the apathy of the Japanese authorities generates a banking panic. Finally, in 2008, the global financial crisis, then the explosion of the Fukushima nuclear power plant in March 2011, caused two new major shocks.
These repeated shocks are reminiscent of the fate of the euro zone. In 2008, the financial crisis emanating from the United States brought the European economy to its knees. In 2011, the excessively rapid rise in interest rates, overly restrictive fiscal policies and the inability to extinguish the fire from Greece added a second recession, which could have been avoided. The Covid-19 pandemic creates a third historic shock.
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