Euro area shocks less pronounced than in Japan's case

EURO area growth has underperformed Japan over the past seven years since its crisis. Part of the problem is that the euro area didn't learn any lessons from Japan's experience of deflation in the 1990s as it refused to accept any similarities and continues to reject the comparison.

Consequently, we believe that the euro area now faces an outlook that is more challenging than that of Japan in the 1990s and will continue to face extraordinary difficulties in lifting growth on a sustained basis.

Ironically, our analysis compari…