In its weekly economic overview, Standard Life Investments said the European Central Bank (ECB) should “learn from Japan’s mistakes” in order to avoid a decade of stagnation.
“There are some similarities between the regions. First and foremost is the worrying decline in inflation, coupled with deteriorating inflation expectations,” a statement from Standard Life Investments said.
“Furthermore, the Eurozone is more than halfway through a potentially lost decade, with output still well below 2008 levels.
“The ECB and domestic governments should learn from Japan's mistakes and take note of the increased urgency that their Japanese peers are now showing to try and snap Japan out of its malaise,” the statement said.
However, Standard Life Investments pointed out there are “important differences” between Europe's and Japan’s handling of their respective economic situations.
“While we would be critical of European policy during the crisis, the response has been more proactive than that of Japanese policymakers in the 1990s,” Standard Life Investments said.
“Furthermore, bubbles in domestic asset prices have generally been smaller in the Eurozone. However, this does not give cause for complacency,” it said.
“A healthy banking sector is a necessary, but not sufficient condition for economic recovery in Europe. To generate this upturn, the [EU] requires demand-side stimulus from monetary and fiscal policy alongside structural reform,” the statement said.
