DEFINITION of 'Eurosclerosis'

A term introduced by German economist Herbert Giersch referring to the economic stagnation that can result from a government's overregulation and overly generous social benefits policies. Eurosclerosis, which stems from the medical term sclerosis, meaning the hardening of tissue, describes countries experiencing high rates of unemployment and lagging job creation during periods of economic growth.

BREAKING DOWN 'Eurosclerosis'

Eurosclerosis originally referred to Europe's slow job growth, and, politically, to its slow pace towards European integration. Currently, Eurosclerosis is used to describe an economy that is experiencing stagnation. Some economists believe that a contributing factor leading to Eurosclerosis is the adaptation of overly generous social benefits, such as unemployment benefits, food stamp programs and mortgage-modification programs, which can create disincentives to find and accept employment.

Following periods of high unemployment, employers may be ready to hire, but workers are less apt to work if the benefits outweigh their potential earnings.

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