Olivier Accominotti and Barry Eichengreen look at the crisis in Europe, and tell us something new. I knew that it was best viewed as a balance-of-payments crisis, not a debt crisis — a case in which large capital inflows to Europe’s periphery suddenly went into reverse. What I didn’t know was that something quite similar happened in Europe from 1919 to 1933, with huge inflows to Austria, Hungary and Germany suddenly shifting to huge outflows, and with similarly disastrous results.

One thing worth following up on, however, is an issue suggested by their use of the term “sudden stop”, which was coined by Guillermo Calvo after the Asian crisis of the 1990s. One thing Calvo went on to point out, however, was that sudden stops are often followed by “phoenix miracles,” in which the economy comes roaring back (pdf).

Seen any phoenixes lately?

The thing is, there were indeed phoenix-like recoveries after 1929-33, everywhere except France:

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Why was France different? It stayed on the gold standard. And it’s hard to avoid the notion that the absence of any phoenixes in Europe today comes from the role of the euro, which is acting as a similar constraint, only worse.

But hey, Europe has just had one quarter of (modest) growth. The euro is a triumph!