Can Europe avoid falling in to a Japanese-style stagnation trap?

Can Europe avoid falling in to a Japanese-style stagnation trap? In this type of trap, we see a repeated cycle of a financial crisis leading to a fiscal crisis, leading to a decline in consumer and investor confidence, and a resulting fall in demand. The decline in growth that inevitably follows simply causes the cycle to repeat itself. In theory, this should lead to improved competitiveness, but in Japan the forces of decline outweighed any boost in export demand. World Bank Regional Director Peter Harrold discusses the question in CASE latest E-brief by focusing on the two keys to Europe’s past success and the two key structural areas that could be the difference between stagnation and success.