Over the next few years, the U.S. will attempt to reduce the budget deficit and unemployment by way of an expansive monetary policy, a goal that is likely to be achieved. Moreover, the U.S. will succeed in maintaining an undervalued exchange rate for the dollar. Under these circumstances, the U.S. economy might grow by 2½ percent on average until the year 2000, ½ percentage point faster than the economies of Western Europe and Japan. The slowdown in economic growth since the middle of 1995 had the effect of raising budget deficits and unemployment in Western Europe. If fiscal policy responds to the deceleration with further cuts in government expenditures, there is a risk that the growth slowdown will deepen to a genuine recession. This can be expected to impede the integration process of the EU, because various countries might be tempted, more than now, to relieve their own problems through devaluations. This forecast is based on the assumption that the EU countries, through more intense cooperation, will succeed in avoiding a recession: the German Bundesbank will markedly lower key interest rates in the first half of 1996, facilitating a reduction in European interest rates; to combat unemployment, some specific measures might also be taken, such as stimulating investment in infrastructure. Under these assumptions, the economies of Western Europe might grow by 2 percent during the period 1996-2000. The Japanese economy will continue to expand at a much lower rate than in the 1970s and 1980s. Growth in exports and investment will be considerably weaker than in the past: the sustained overvaluation of the yen lowers the competitiveness of the Japanese economy not only vis-à-vis other industrialized countries but also vis-à-vis competitors in East Asia. Moreover, Japanese exports will suffer from the weakness of the European market. Over the forecast period, GDP in Japan is likely to grow by no more than 2 percent per year on average.