The Western Europes economy quickly revived within a decade following World War II but declined during the 70s and 80s. European Economy After World War II

In the early postwar period, western Europeans faced a number of serious economic problems The need to rebuild infrastructure and factories Transitioning from wartime to peacetime production Inflation, shortages, and resulting black marketeering These states were helped by the enormous infusion of funds from the U.S. as part of its Marshall Plan to halt the spread of communism into western Europe. Western European states expanded already existing social welfare programs in the postwar period. The Labor Party government of the UK, elected shortly after end of the war, nationalized major industries and banks France, now in its Fourth Republic, established a mixed economy, with elements of both socialism and capitalism.

France and West Germany, which elected its first postwar government in 1949, were both run by the Christian Democratic Party. Germany retained its extensive social welfare system while reintroducing free-market capitalism. Western European states quickly recovered, reaching prosperity within a few years after the end of the war. Germany, France, Italy, the Netherlands, Belgium, and Luxembourg (Inner Six) organized the Common Market, which ended tariffs among the members, first on steel and coal, and later expanding to other commodities, and helped create a European economic revival to compete with the U.S. Overall, economic policies in the three major states were highly successful

In the 1970s and 1980s, western European states suffered economic decline, with high energy cost, stagnation, and high unemployment. Britain and Germany instituted austerity measures Britain, under Prime Minister Margret Thatcher, elected 1979, privatized previously nationalized industries, reduced the influence of trade unions, shrank the welfare state, and reinvigorated the economy by encouraging unbridle free-market capitalism. France initially attempted to address the crisis with a socialist program under President Francois Mitterrand, but a few years later adapted austerity measures too. By 1985, all these policies were only marginally effective as the western European economy remained trouble by high unemployment and stagnation.