OECD projections for European countries imply that the crisis will have no long-term effect on trend growth. An historical perspective says this is too optimistic. Not only is the legacy of public debt and its requirement for fiscal consolidation unfavourable but the experience of the 1930s suggests that much needed supply-side reforms are now less probable – indeed policy may well become less growth friendly. Whereas the 1940s saw the Bretton Woods agreement and the Marshall Plan pave the way for the ‘Golden Age’, it is unlikely that anything similar will rescue Europe this time around.
