Euro-Area Economy Looks a Lot Like 20-Years-at-Zero Japan

(Bloomberg) -- Here’s an uncomfortable thought for the European Central Bank as it attempts to lift interest rates off the lower bound: the euro area looks a lot like Japan, where rates went to zero 20 years ago and never left, according to analysis by Bloomberg Economics. Though the ECB eventually delivered a huge monetary stimulus, a period of deep austerity delayed the recovery from the sovereign debt crisis in 2010 and left the economy running under capacity. Even as the crisis recedes into the rear-view mirror, limited productivity gains, a shrinking working age population, and modest space to catch up to the technology frontier compound the problems.

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