Convoy Unraveled: Why U.S. and European Post-Crisis Economic Policies Differ (And What to do About It)

After a coordinated initial response to the global financial crisis in 2008-09, the coordination between the major economies of the EU and the United States had since unraveled. In 2010, policy divergences between the United States and Europe had emerged and they had come to dominate the international discussion on macroeconomic policy priorities. As often, several competing explanations were on offer. One emphasizes differentiated economic and financial structures as the origin of the dissimilar impacts of a common shock. Another view stresses differences in the policy set-up arising from institutional constraints, especially though not only, as a result of the EU’s particular policy set-up. A third one puts the onus on doctrine and ideology, and how that causes different perceptions of the policy challenges and risks faced by policymakers.This paper proposes five measures that the EU and United States could take together to help regain some form of economic coordination despite these obstacles.