Here is an article from the NYT by Paul Krugman on Europe. And a slide deck he refers to. The slide deck shows us a number of things:
- Output and capacity utilization are well below potential
- The crisis reduced Europe's potential GDP
- Investment has tanked
- US productivity is way higher than Europe's
- Interest rates are low
- People do not expect inflation (or expect low inflation)
- Bank lending to the private sector has tanked
Krugman is arguing for a Keynesian fiscal response to tackle the demand deficiency.