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Where prices were rigid, as in goods and labour markets, fewer euros meant slow disinflation but rapid contraction in output and a big rise in unemployment.

If there had been no single currency, the northward capital flight would have depreciated peripheral currencies. Had the periphery borrowed in its own currency, that would have imposed losses on its foreign creditors while also boosting its export industry. Had peripheral economies instead borrowed in dollars or deutschmarks their debt burdens would have ballooned with depreciation, potentially pushing banks and sovereigns into default—but the depreciation boost to competitiveness would have remained. Either way, the depreciation of the currency would effectively shrink the value of wealth in the periphery.

In 2008, 80 percent of adults aged 25 to 54 in the E.U. 15 were employed (and 83 percent in France). That’s about the same as in the United States. Europeans are less likely than we are to work when young or old, but is that entirely a bad thing?

And Europeans are quite productive, too: they work fewer hours, but output per hour in France and Germany is close to U.S. levels.

After all, while reports of Europe’s economic demise are greatly exaggerated, reports of its high taxes and generous benefits aren’t. Taxes in major European nations range from 36 to 44 percent of G.D.P., compared with 28 in the United States. Universal health care is, well, universal. Social expenditure is vastly higher than it is here.

So if there were anything to the economic assumptions that dominate U.S. public discussion — above all, the belief that even modestly higher taxes on the rich and benefits for the less well off would drastically undermine incentives to work, invest and innovate — Europe would be the stagnant, decaying economy of legend. But it isn’t.

The debt-to-GDP ratio is best reduced through sustained nominal GDP growth.

Besides, having been there, no one really wants to unleash inflation anymore. That leaves us with real GDP growth as a necessary condition for bringing the debt-to-GDP down painlessly.

But in today’s world voters are angry at everything that is called Europe and will not back a fiscal union.

In most Eurozone countries, structural reforms are as needed now as they were before the crisis.

Banks are at the heart of a diabolic loop: bank holdings of their national public debts (Brunnermeier et al., 2011).

The long-hoped-for awakening of the ECB has produced several miracles, especially a major relaxation of market anguish.

For that reason, they deleverage, which leads to a credit crunch, which slows growth down.

The ECB is the lender of last resort both to banks and to governments.

Massive forbearance has allowed many banks to not fully account for the losses that they incurred in 2007-8.

Meanwhile, interest rates may be too low for countries like Germany, helping to fuel a rise in real estate prices, Dirk Schumacher, an economist at Goldman Sachs in Frankfurt, said. “Cutting rates in the current environment of segmented markets is likely to boost growth in those places where it is needed least,” he wrote in a note to clients before the rate decision.

I suspect that, in order to limit country specific shocks, euro members may have to actively use macro prudential tools such as rules on the amount of liquidity that banks should hold, or upper limit to loans to value ratios, much more so that they have in the past.

If the U.S. and a number of other advanced countries are going to decrease their current account deficits, then some countries will have to decrease their current account surpluses. And for this to happen, there has to be, among other changes, an adjustment of the exchange rates. Put more bluntly, most emerging markets have to accept an appreciation.

These countries have to do what they need to do. There’s no question there has to be fiscal consolidation. We can discuss the pace, but it has to happen. The other is competitiveness, which I see as much tougher of the two.

Take the big two, Italy and Spain. You can always dream of more, but I think they’re serious about doing it, both on the fiscal front and the structural-reforms front. I think it may well be that even if they do everything they can, and do it right, it’s still not enough. They have to have help — I would say when needed rather than if needed.

It’s not that I don’t care about the way it’s done. But I care about the result. These countries, if they’re doing the right things, they have to be able to finance themselves.

Some people say a euro depreciation would help Europe a lot. I think there is an argument for it, even in a multilateral context. You have to depreciate vis-a-vis somebody, so somebody has to appreciate. My sense is we would like most of the depreciation to be vis-a-vis emerging-market countries. Even if there was a depreciation vis-a-vis the dollar, I still think it would be a good thing.

The new agreement suggests that in the future, banks will be bailed out by the collective effort of Eurozone countries.

First, this arrangement is to be finalised by the end of the year. This means that, in the end, the Spanish debt will rise by €100 billion (the market participants who enthusiastically celebrated the decision by raising the price of Spanish bonds will eventually understand that). Ditto in the not unlikely case that some Italian or French banks wobble before December.

Third, the arrangement is linked to the establishment of a “single supervisory mechanism involving the ECB”. This could be a single Eurozone supervisor built inside the ECB, which would go a long way to plugging one the worst mistakes in the Maastricht Treaty (lack of a joint regulation and resolution regime for banks).

This is important because a contagious banking crisis that hits several large banks would require much more money than is available in the EFSF-EMS facilities.

Light conditionality, as they requested, is bound to collapse at the foot of the Bundestag, which must approve every single loan.

There was nothing on collapsing Greece, nothing on unsustainable public debts in several countries, and no end in sight to recession in an increasing number of countries.

“Sixteen hundred jobs a week were being lost before we took office; we’re now in a position where 1,200 jobs a week are being created, and our consumer confidence numbers have been steadily growing.”

For the euro zone at large, though, a step back often follows each step forward. France and Italy, the bloc’s second- and third-largest economies, are increasingly seen as the latest sick men of the Continent. Even Germany, the bloc’s powerhouse, grew only feebly last year, by 0.4 percent.

In Ireland, more than 80 percent of the investment came from abroad, with banks and pension funds making up 37 percent of the offering and fund managers about half.

Mr. Kirkegaard cited “the hunt for yield.”

The authors come up with a variety of numbers, including one that has received a lot of attention: potential G.D.P.—broadly speaking, the level of G.D.P. consistent with stable inflation—“is currently about 7 percent below the trajectory it appeared to be on prior to 2007.” According to the latest figures from the Commerce Department, the G.D.P. is now close to seventeen trillion dollars, and seven per cent of that figure is $1.2 trillion. This is a lot of money to have gone missing, especially if it will never be recovered. Hence Krugman’s dire conclusion: “By tolerating high unemployment we have inflicted huge damage on our long-run prospects …. What passes these days for sound policy is in fact a form of economic self-mutilation, which will cripple America for many years to come.”

As well as figuring out the current level of potential G.D.P., the authors estimate its growth rate. This is the more important figure, because it’s what determines living standards over the long term

In the nineteen-eighties, Larry Summers and Olivier Blanchard, who is now the chief economist of the I.M.F., resurrected the idea and gave it a new name, which they borrowed from engineering: hysteresis. Blanchard and Summers examined hysteresis in Europe, where high rates of unemployment have long been a problem.

The good news is that things aren’t quite as bad as the figures in the Fed paper might suggest. If we can get policy right and sharply increase the level of over-all demand in the economy, most of the damage done in the past five years is reversible.

At the moment, sadly, there is no prospect of any more fiscal stimulus, let alone a war-sized one, and the onus is falling on the Fed to gee up the economy.

From a standing start, China now has 12% of graduates in the world's big economies - approaching the share of the UK, Germany and France put together. The incumbent superpower, the United States, still towers above with 26% of the graduates.

All that said, big factories have a way of creating larger economies around them—they have a “multiplier effect,” in economic parlance

Think of the story of the real-estate boom in the United States and other countries in the first half of the 2000’s. This was a story not of a “bubble”; rather, the boom was a triumph of capitalist enterprise in a new millennium.

These stories were so powerful because a huge number of people were psychologically – and financially – invested in them

With the abrupt end of the boom in 2006, that ego-boosting story also ended.

To understand why economic recovery (if not that of the stock market) has remained so weak since 2009, we need to identify which stories have been affecting popular psychology.

ransfers from a Luxembourg company to the US would have typically been subject to a withholding tax. Last year, after attracting the attention of Spanish tax authorities, Exxon quietly closed down the operation.

“Normally you would have to pay a 10 per cent withholding tax at source to send profits to the US,

Spain introduced the ETVE in the mid-1990s to encourage foreign investment, and better compete with Luxembourg and Holland for international companies seeking tax-efficient European holding structures. It also allowed for foreign companies to take advantage of Spain’s strong network of bilateral tax treaties with countries in Latin America, such as Argentina, Brazil and Mexico, which can offer more favourable tax rates than other countries. Once the ETVE has been established all overseas dividends that are paid into it are exempt from tax in Spain, and can be easily moved on to a final destination, providing a small number of conditions have been met. Most importantly, corporation tax must have been paid in the country of origin on the dividends being transferred, and companies using ETVEs to house shareholdings in foreign subsidiaries must not be resident in any country identified by Spain as a tax haven.

In fact, Linthal is an ETVE used by Ambev, a subsidiary of Anheuser-Busch InBev, the Belgian-based brewer, to distribute dividends from several Latin American beer brands, such as Argentina’s Quilmes and Cervecería Boliviana Nacional, to its holding company in Brazil.

The size of the banking sector and exposure to Greece were known risks but at that time there was no banking problem in Cyprus

The containers were part of a shipment going from Iran to Syria that was intercepted in Cypriot waters after a tip from the U.S. The president took the decision to keep the ammunition. [NOTE: An independent prosecutor found that Christofias has ignored repeated warnings and pleas to destroy or safeguard the ammunition, apparently in hopes of one day returning it to Syria or Iran.]

Instead, they started lobbying the Russian government to give them a loan that would help them finance the country for a couple more years, and Russia came through, unfortunately,

I say unfortunately because as a result the government could keep operating and accumulating deficits without taking corrective action.

The next important date was the October 26-27, 2011 meeting of the EU council in Brussels where European leaders decided to wipe out what ended up being about 80% of the value of Greek debt that the private sector held. Every bank operating in Greece, regardless of where it was headquartered, had a lot of Greek debt.

For Cyprus, the writedown of Greek debt was between 4.5 and 5 billion euro, a substantial chunk of capital.

The Basle II framework that governments adopted internationally, and that the EU supervisory framework during this period also incorporated, specifies that holdings of government debt in a states' own currency are a zero-risk-weight asset, that is they are assigned a weight of zero in calculating capital requirements.

the governments should have agreed to make the EFSF/ESM available for direct recapitalization of banks instead of asking each government to be responsible for the capitalization.

Following a downgrading in late June 2012, all three major rating agencies rated the sovereign paper Cyprus below investment grade. According to ECB rules, that made the government debt not eligible as collateral for borrowing from the eurosystem, unless the ECB suspended the rules, as it had done for the cases of Greece, Portugal and Ireland. In the case of Cyprus, the ECB decided not to suspend the eligibility rule.

The governments have created risk in what before last week were considered perfectly safe deposits. This is going to have a chilling effect on deposits in any bank in a country perceived to be weak. This will mean the cost of funding will increase in the periphery of Europe and as a result, the cost of financing for businesses and households will increase. That will add to the divergences we already have and make the recession in the periphery of Europe deeper than it already is. This is really a disaster for European economic management as a whole. 

Self-driving vehicles are an example of the crosscurrents.

Ad sales agents and pilots are two jobs that the Bureau of Labor Statistics projects will decline in number over the next decade. Flying a plane is largely automated today and will become more so.

Telemarketers are among those most at risk

More than 16 percent of men between the ages of 25 and 54 are not working, up from 5 percent in the late 1960s; 30 percent of women in this age group are not working, up from 25 percent in the late 1990s.

“The answer is surely not to try to stop technical change,” Mr. Summers said, “but the answer is not to just suppose that everything’s going to be O.K. because the magic of the market will assure that’s true.”

Yet educational attainment has slowed so much that the United States has lost its once-enormous global lead.

the biggest reason to think economic growth may translate more directly into wage gains is the turnabout in health costs. After years of rapid increases, they have slowed sharply in the last three years. Mr. Obama likes to give more credit to the 2010 health care law than most observers do, but he’s not wrong about the trend’s significance.

It’s also possible that the forces behind the great wage slowdown – from globalization to our often-sclerotic government to (at least for many workers) technological change – are still more powerful than the positive forces.

In France, the leader of the far-right National Front, Marine Le Pen, recently acknowledged that her party had received a loan for 9 million euros, or about $11 million, from a Kremlin-linked bank.

Faced with punishing sanctions, a petro-economy pushed to the brink by plunging oil prices and the wildly gyrating value of the ruble, Mr. Putin this month halted the project.

Geological surveys suggested that Bulgaria could be sitting atop an underground ocean of natural gas, enough to be self-sufficient for years, enough to eclipse the advantages of South Stream.

On April 4, 2014, soon after Mr. Putin annexed Crimea, Bulgaria’s Parliament gave initial passage to a bill that effectively exempted South Stream from a number of European Union regulations, most important, the one that would have forced Gazprom to allow non-Russian gas to flow through the pipeline.

“If I hear one more word about competition, I’m going to freeze your you-know-whats off,” Mr. Putin reportedly shouted.

The anti-fracking movement became so broad that in January 2012, Parliament banned not only the extraction of shale gas, but even exploration that would quantify the country’s reserves.

When the Bulgarian government refused, the European Union cut off tens of millions of euros in regional development funds.

In desperate need of the European funds, the prime minister announced the next day that South Stream would be halted until it had full European Union approval.

While “he overreached, and he underestimated the response” to his intervention in Ukraine, said Mr. Gray, the former American diplomat, the Russian leader has been “quite effective” in countries like Bulgaria.“He won a great deal by getting Nabucco stopped,” Mr. Gray said. “Ultimately, his goal is to keep as much control over the former parts of the Soviet empire as possible.”

Carefully taught, the assignments can help make math more concrete. Students don’t just memorize their times tables and addition facts but also understand how arithmetic works and how to apply it to real-life situations. But in practice, most teachers are unprepared and children are baffled, leaving parents furious.

On national tests, nearly two-thirds of fourth graders and eighth graders are not proficient in math. More than half of fourth graders taking the 2013 National Assessment of Educational Progress could not accurately read the temperature on a neatly drawn thermometer.

On the same multiple-choice test, three-quarters of fourth graders could not translate a simple word problem about a girl who sold 15 cups of lemonade on Saturday and twice as many on Sunday into the expression “15 + (2×15).” Even in Massachusetts, one of the country’s highest-performing states, math students are more than two years behind their counterparts in Shanghai.

A 2012 study comparing 16-to-65-year-olds in 20 countries found that Americans rank in the bottom five in numeracy.

One study that examined medical prescriptions gone awry found that 17 percent of errors were caused by math mistakes on the part of doctors or pharmacists.

“I’m just not a math person,” Lampert says her education students would say with an apologetic shrug.

In the 1970s and the 1980s, cognitive scientists studied a population known as the unschooled, people with little or no formal education.

For instance, many of the workers charged with loading quarts and gallons of milk into crates had no more than a sixth-grade education. But they were able to do math, in order to assemble their loads efficiently, that was “equivalent to shifting between different base systems of numbers.”

Studies of children in Brazil, who helped support their families by roaming the streets selling roasted peanuts and coconuts, showed that the children routinely solved complex problems in their heads to calculate a bill or make change.

The cognitive-science research suggested a startling cause of Americans’ innumeracy: school.

The answer-getting strategies may serve them well for a class period of practice problems, but after a week, they forget. And students often can’t figure out how to apply the strategy for a particular problem to new problems.

In the process, she gave them an opportunity to realize, on their own, why their answers were wrong.

At most education schools, the professors with the research budgets and deanships have little interest in the science of teaching

Only when the company held customer focus groups did it become clear why. The Third Pounder presented the American public with a test in fractions. And we failed. Misunderstanding the value of one-third, customers believed they were being overcharged. Why, they asked the researchers, should they pay the same amount for a third of a pound of meat as they did for a quarter-pound of meat at McDonald’s. The “4” in “¼,” larger than the “3” in “⅓,” led them astray.

Some of the failure could be explained by active resistance.

A year after he got to Chicago, he went to a one-day conference of teachers and mathematicians and was perplexed by the fact that the gathering occurred only twice a year.

More distressing to Takahashi was that American teachers had almost no opportunities to watch one another teach.

In Japan, teachers had always depended on jugyokenkyu, which translates literally as “lesson study,” a set of practices that Japanese teachers use to hone their craft. A teacher first plans lessons, then teaches in front of an audience of students and other teachers along with at least one university observer. Then the observers talk with the teacher about what has just taken place. Each public lesson poses a hypothesis, a new idea about how to help children learn.

The research showed that Japanese students initiated the method for solving a problem in 40 percent of the lessons; Americans initiated 9 percent of the time.

Finland, meanwhile, made the shift by carving out time for teachers to spend learning. There, as in Japan, teachers teach for 600 or fewer hours each school year, leaving them ample time to prepare, revise and learn. By contrast, American teachers spend nearly 1,100 hours with little feedback.

“Sit on a stone for three years to accomplish anything.”

In one experiment in which more than 200 American teachers took part in lesson study, student achievement rose, as did teachers’ math knowledge — two rare accomplishments.

Examining nearly 3,000 teachers in six school districts, the Bill & Melinda Gates Foundation recently found that nearly two-thirds scored less than “proficient” in the areas of “intellectual challenge” and “classroom discourse.”