One of the probable long-term consequences of the financial crisis is an acceleration of Europe’s economic decline. This is by no means an inevitable outcome, but I fear it is likely.

No matter what we do, China and India will eventually displace the European Union as the world’s largest economies. What I mean by decline is a decline in living standards. The financial crisis has led to a fall in potential growth in the entire North Atlantic region. Both the US and Europe will go through an adjustment period, during which growth will be lower. The US will be first to recover: it is a more dynamic economy, has a more coherent framework for macroeconomic policy, and, unlike the EU, has a genuine internal market which is not unravelling.