Europe’s frightful economy

Sander Tordoir, chief economist at the Centre for European Reform, has suggested that Europeans’ high savings rate – which, at 15.4%, is more than three times that of the US – can be brought down, and channelled into productive investments by specific government policies, such as consumer subsidies for electric vehicles.

Tordoir also noted that, while individual citizens’ decisions to squirrel away their money may be economically rational (e.g. as Europeans age, they need to save more for retirement), this can also “add up to a sub-optimal outcome for aggregate demand and output”.

“With the right policies, governments can pull those savings into productive investment and generate demand for Europe’s producers,” Tordoir said.