When it comes to our economy, neither East nor West is best

The eurozone may be 'the new Japan' but the UK isn't, and we won't become a mini-America either

President of the European Central Bank (ECB) Mario Draghi attends a press conference in Frankfurt am Main, on June 5, 2014. (GETTY IMAGES)

Is Europe the new Japan? That has been the question that some economists, usually American ones, have posed in response to the stagnation in the eurozone. There are certainly parallels with Japan's situation 20 years ago. Last week the European Central Bank cut its forecasts sharply for both growth and inflation next year, holding out the possibility that the eurozone might indeed topple into some sort of deflationary spiral. The ECB president, Mario Draghi, hinted that the bank might consider quantitative easing – adopted here, in the United States and now eventually in Japan – early next year to counter the threat of deflation.

So the fear is there. But the question is too simple. There are certainly similarities with Japan, including a very low birth rate, the prospect of an ageing population, high public debt in some countries, and in some countries too, falling prices. But there are also huge differences, including much higher overall immigration and vastly greater cultural divergence. Japan is homogenous; Europe is not.

The better question surely is whether Europe, or at least much of it, wants to be the new Japan. The negative tone of the phrase ignores the fact that Japan has been successful at increasing its living standards, caring for its ageing population, maintaining a calm and largely crime-free society, and coping with the catastrophe of a grave nuclear accident. You could say it looks inward rather than outward, caring for its own people rather than accepting immigrants and seeking to project power overseas, but many in Europe would support that too.

Maintaining an extensive welfare system, protecting those in work even if that makes it harder for outsiders to get jobs, supporting substantial public pensions, investing heavily in public infrastructure – all these aspects of the European socio-economic model are pretty attractive. If the price of maintaining this model is a stable society rather than a vibrant one, many would opt for that.

It is not however an attractive prospect for the ambitious young. Britain has benefited from a wave of young people from continental Europe choosing to make, or at least start their careers here. For years Europe has been losing many of its graduates to the United States, for post-graduate degrees and then for employment. We have become a sort of halfway-house towards America, offering some of the attractive characteristics of the US job model but without the disruption and barriers to entry.

One big question – which I don't think we can answer at the moment – is whether the main driver of this migration within Europe is cyclical or structural. The job opportunities in Europe are in the north: in Germany, Britain, Sweden and so on. For all sorts of reasons, including the impact of the euro, it has been a two-speed recovery. Thus southern and eastern Europeans have moved to take advantage of the greater opportunities elsewhere, as you would expect. If this is largely cyclical, as growth resumes in Italy, Spain and elsewhere, as it eventually will, then the present tensions will ease. If on the other hand it is mainly structural, then young people will continue to move out of what will literally become "old Europe". That will make it, like Japan, older still.

We will have more of a feeling in another year or so. If a combination of a monetary boost from the ECB, coupled with more expansionist policies among national governments, can manage to crank up a bit more growth we may start to see a significant fall in unemployment in the weaker eurozone countries. But this is a big "if". My instinct is that this is principally a structural problem. In other words the answer to the question as to whether Europe is the new Japan, is that large parts of it are. And the answer to the second question, whether this is what people want, is: "Yes, many do."

But not all, and particularly not large numbers of the young. The fact that young people can move around for jobs, means that Europe as a whole will not become like Japan. Scandinavia won't. I don't think Germany will, though it faces a huge demographic challenge and as a result will tend to be a slow-growing region. Britain won't, though we will continue to fret about the consequences of continued immigration from the rest of Europe and struggle to adapt to it.

So from our half-in, half-out perspective of Europe, the challenge here will be to remain a relatively vibrant, fast-growing economy (well, fastish-growing) but also to preserve the elements of the European social model that we most value. Actually the two should go together, and we have seen the pressures that slow growth imposes. To manoeuvre through the thicket will not be easy and we will need some luck. But we don't want to be a new Japan or even a mini-America, so we have no option but to try.