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There are still some big risks for Europe. Blanqué said maintaining employment growth is essential if the economy is to expand. He is worried that companies in Europe remain cautious about investing and are instead focused on reducing debt. "There's this great American saying that nobody has ever shrunk their way to greatness," quipped Achleitner, in agreement. But he said he is seeing a new mood among European companies. "People are starting to think they are coming to the end of their shrinking exercises and need to put on the growth hat."
Given the continuing high cost of labor in Europe and the strong euro, some of that growth is likely to come from overseas. Naím speculates that European firms will increasingly acquire companies in places where it's less onerous to do business, such as the U.S., and move their base there. And he is worried that if the euro continues to strengthen, European protectionism could grow. "A euro of $1.40 or more for a couple of years is going to generate as much pressure on governments for protectionism as it is going to generate pressures toward deregulation," he said.
But such concerns pale in comparison with fears about what could go wrong if nothing is done about the U.S. fiscal and trade deficits. "The war [in Iraq] is being paid for by borrowing. The increase in drug benefits is being paid for by borrowing. Nobody's been asked to do anything," Sachs says. But if America faces some belt tightening, doesn't it follow that the rest of the world will feel the pinch? Not necessarily, argues Tyson: So long as the rest of the world doesn't suddenly stop financing the U.S. deficits--forcing Washington to take radical action--the global economy can handle the adjustment. The rest of the world is hoping that she's right.