3 for Europe's macro Economy

...

for Europe’s macro-economy, Keynes is the most operationally useful framework today, but only if complemented by Friedman’s monetary discipline. Kondratieff is diagnostic, not prescriptive.

Below is a precise, policy-relevant comparison.

1. Kondratieff: useful lens, weak policy tool

What it is

• Theory of long waves (≈40–60 years) driven by technology, capital formation, debt cycles.

• Explains why economies move through phases: expansion → saturation → crisis → restructuring.

Value for Europe

• ✔ Excellent structural diagnosis:

  • Europe is likely in a late-cycle / restructuring phase:

    • aging demographics

    • high public debt

    • deindustrialisation pressure

    • energy transition & re-armament

• ✔ Helps explain why growth is structurally weak, even with stimulus.

Limits

• ❌ Offers no actionable short- or medium-term policy guidance

• ❌ Cannot tell governments what to do next year

Verdict

Kondratieff explains where we are, not what to do.

2. Keynes: best fit for Europe’s institutional reality

Core idea

• In downturns, aggregate demand fails → state must step in via:

  • fiscal spending

  • public investment

  • automatic stabilisers

Why Keynes fits Europe

• Europe already has:

  • large welfare states

  • automatic stabilisers

  • public investment needs (defence, energy, infrastructure, AI)

• The euro area cannot devalue currencies individually, so fiscal policy matters more.

Current European conditions

• Chronic under-investment

• Demand shortfalls in parts of the eurozone

• Fragmented capital markets

• Political need for social stability

Keynes works best when

• Spending is productive, not consumption-only

• Debt finances future capacity (energy grids, defence, semiconductors)

Risk

• Persistent deficits without productivity gains → debt trap

Verdict

Keynes is the most realistic short- and medium-term policy framework for Europe.

3. Milton Friedman: necessary constraint, dangerous as doctrine

Core idea

• Inflation is a monetary phenomenon

• Markets allocate resources better than governments

• Central banks should follow rules, not discretion

Where Friedman is right (especially for Europe)

• ✔ ECB credibility matters enormously

• ✔ Loose money + fiscal dominance → inflation & asset bubbles

• ✔ Structural reforms matter more than stimulus alone

Where Friedman fails in Europe

• ❌ Assumes flexible labour and capital markets (Europe doesn’t have them)

• ❌ Underestimates coordination problems in a monetary union

• ❌ Pure monetarism cannot fix:

  • defence underinvestment

  • energy dependence

  • strategic industry gaps

Verdict

Friedman is an essential brake, but a poor engine for Europe.

Bottom line (clear recommendation)

If you must choose one: → Keynes

But the optimal European macro mix is:

Kondratieff for diagnosisKeynes for actionFriedman for discipline

In one sentence:

• Kondratieff explains why Europe feels stuck

• Keynes explains what to do now

• Friedman explains what not to lose control of