The success of QE in the United States reflected initial conditions that were very different from what we now see in Europe. Indeed, eurozone countries should not relax their reform efforts on the assumption that ECB bond purchases will solve their problems. But even if these countries cannot overcome the political barriers to implementing structural changes to labor and product markets that could improve productivity and competitiveness, they can enact policies that can increase aggregate demand.The sharp fall in long-term rates induced investors to buy equities, driving up share prices. Low mortgage interest rates also spurred a recovery in house prices. In 2013, the broad Standard and Poor’s index of equity prices rose by 30%. The combination of higher equity and house prices raised households’ net worth in 2013 by $10 trillion, equivalent to about 60% of that year’s GDP.

That, in turn, led to a rise in consumer spending, prompting businesses to increase production and hiring, which meant more incomes and therefore even more consumer spending.  QE’s success in the US reflected the Fed’s ability to drive down long-term interest rates. In contrast, long-term interest rates in the eurozone are already extremely low, with ten-year bond rates at about 50 basis points in Germany and France and only 150 basis points in Italy and Spain.

So the key mechanism that worked in the US will not work in the eurozone.

But, fortunately, QE is not the only tool at policymakers’ disposal. Any eurozone country can modify its tax rules to stimulate business investment, home building, and consumer spending without increasing its fiscal deficit, and without requiring permission from the European Commission. Consider the goal of stimulating business investment. Tax credits or accelerated depreciation lower firms’ cost of investing and therefore raise the after-tax return on investment.

Demand for new homes could be increased by allowing homeowners to deduct mortgage interest payments (as they do in the US), or by giving a tax credit for mortgage interest payments. A temporary tax credit for home purchases would accelerate home building, encouraging more in the near term and less in the future. Here, the revenue loss could be offset by an increase in the personal tax rate.

A commitment to raise the rate of value-added tax by two percentage points annually for the next five years would encourage earlier buying to get ahead of future price increases. The reduction in real incomes caused by the VAT increase could be offset by a combination of reduced personal income taxes, reduced payroll taxes, and increased transfers.

Though eurozone members cannot adjust their interest rates or their exchange rates, they can alter their tax rules to stimulate spending and demand, with the appropriate policy possibly differing from country to country. It is now up to national political leaders to recognize that QE is not enough – and to start thinking about what else should be done to stimulate spending and demand.