If the first stage of crisis resolution is recognition of the problem, one has to be disappointed by Olli Rehn's assessment of the European sovereign debt crisis (Comment, December 11). For, despite the European Central Bank's recent substantial downgrade of its European economic growth forecast, Mr. Rehn fails to recognise that at the core of the European debt crisis is a deepening in its periphery's economic recession. That deepening is substantially undermining efforts by the countries in the periphery to stabilise their public finances as is reflected in the persistence of stubbornly high budget deficits and in rising public debt to gross domestic product ratios.
Failing to recognise Europe's economic growth problem, Mr. Rehn exhorts countries in the European periphery to persist with very much the same recipe of fiscal austerity and structural reform that they have applied to date. At the very least, Mr. Rehn would seem to owe us an explanation as to why this time around that policy mix will produce economic growth when it has so singularly failed to produce economic growth so far.