From Liz Alderman in the NY Times today:

Germany and France Aim to Avert a ‘Lost Decade’

The economy ministers of France and Germany called on Thursday for urgent overhauls and a series of investments in both countries to help prevent them and the eurozone from falling into a stagnation trap.

This comes as news of increasing unemployment and falling inflation arrives (from WSJ):

…reports Friday confirmed a grim outlook for much of the eurozone’s $13.2 trillion economy, the world’s second largest after the U.S. Unemployment across the region rose by 60,000 last month, keeping the unemployment rate at 11.5%, the European Union’s statistics agency Eurostat said, far higher than in the U.S. Consumer spending fell in France and Spain.

Eurostat also said consumer prices were just 0.3% higher in the eurozone in November on an annual basis versus 0.4% in October, matching a five-year low. The inflation rate has now been below 1% for 14 straight months, while the ECB targets a rate of just under 2%.

The CEPR/Banca d’Italia eurocoin index also suggests slowing (albeit still positive) growth in the euro area.

Source: eurocoin.

The reference to lost decades reminds me of what Jeffry Frieden and I wrote in Lost Decades:

In the short term, there was no choice but to act decisively, with temporary tax cuts, spending increases, and transfers to the states. And with the economy growing only modestly as recovery began, too rapid a retrenchment in spending and an increase in taxes could very well be counterproductive, throwing the economy back into recession and further accumulation of debt. However, the politics of countercyclical fiscal policy can be perverse, as the Obama administration found. Recessions hit hardest at poor and working-class families, who would benefit most from stimulative fiscal policy. But attempts to undertake these policies face opposition from upper income taxpayers who are less affected by the recession and more concerned about the impact on their future taxes. This opposition can impede an effective fiscal response to cyclical downturns.