The start to the year has been harsh in Europe. Winter has not wanted
to give way to spring, as agreed, and the only positive from this chill is
perhaps its contribution to eurozone growth: nearly one-tenth of a
percentage point of GDP in 2013, according to our estimates. That's
already something, isn't it? Economists love using climate metaphors to
describe their forecasts: "chill in consumption", "investors get cold feet",
"clear skies ahead for the global economy", "headwinds", "clouds
overhanging the West", etc. Myriad are the parallels between economic
and meteorological hazards, so much have economies been navigating
by sight of late. In 2010 the seasonal lexicon appeared with the oftmentioned
"Arab Spring", which, it has to be said, subsequently turned
into winter, summer, fall, and then spring once again. In fact, it seems
that seasonal changes arise as rapidly as new policies for the
Mediterranean periphery. In this economic outlook we provide our own
contribution to this much-vaunted literature by building on the idea of a
"European Winter" in light of the bad winds that continue to batter Europe
without respite. There is a chill in consumption, investment is shaky,
public spending is frozen, trade is bogged down, business lending has
dried-up and governance is numb: the European crisis blizzard carries
on. We thought we could see the first signs of spring, with the financial
markets showing some green shoots, Frankfurt appearing to soften up �
and then the snowstorm arrived (from Cyprus!), freezing over confidence
and institutions in its path. The good news is that, while the eurozone
remains in winter, the United States is in spring (a little wet, perhaps, but
pleasant) meanwhile in large � and less large � emerging countries such
as Brazil, Russia, India, China, Turkey, Mexico, and Indonesia, to name just
a few, temperatures are warming� although without thawing the core.
Any solutions? Europe needs to turn on the heater! So the metaphor is
clear: expansionary monetary policy (OMT), joint fiscal and industrial
policy, banking union, debt restructuring, and efficient use of new tools
such as the EFSF and the ESM, among others. The time has come, we can
wait no more. Even global warming may no longer be such a faithful ally,
what with recent studies showing it may have even slowed. Does this
mean climate change skeptics and euroskeptics are waging the same
war? Whatever, roll on springtime� 2014!
Ludovic Subran
to give way to spring, as agreed, and the only positive from this chill is
perhaps its contribution to eurozone growth: nearly one-tenth of a
percentage point of GDP in 2013, according to our estimates. That's
already something, isn't it? Economists love using climate metaphors to
describe their forecasts: "chill in consumption", "investors get cold feet",
"clear skies ahead for the global economy", "headwinds", "clouds
overhanging the West", etc. Myriad are the parallels between economic
and meteorological hazards, so much have economies been navigating
by sight of late. In 2010 the seasonal lexicon appeared with the oftmentioned
"Arab Spring", which, it has to be said, subsequently turned
into winter, summer, fall, and then spring once again. In fact, it seems
that seasonal changes arise as rapidly as new policies for the
Mediterranean periphery. In this economic outlook we provide our own
contribution to this much-vaunted literature by building on the idea of a
"European Winter" in light of the bad winds that continue to batter Europe
without respite. There is a chill in consumption, investment is shaky,
public spending is frozen, trade is bogged down, business lending has
dried-up and governance is numb: the European crisis blizzard carries
on. We thought we could see the first signs of spring, with the financial
markets showing some green shoots, Frankfurt appearing to soften up �
and then the snowstorm arrived (from Cyprus!), freezing over confidence
and institutions in its path. The good news is that, while the eurozone
remains in winter, the United States is in spring (a little wet, perhaps, but
pleasant) meanwhile in large � and less large � emerging countries such
as Brazil, Russia, India, China, Turkey, Mexico, and Indonesia, to name just
a few, temperatures are warming� although without thawing the core.
Any solutions? Europe needs to turn on the heater! So the metaphor is
clear: expansionary monetary policy (OMT), joint fiscal and industrial
policy, banking union, debt restructuring, and efficient use of new tools
such as the EFSF and the ESM, among others. The time has come, we can
wait no more. Even global warming may no longer be such a faithful ally,
what with recent studies showing it may have even slowed. Does this
mean climate change skeptics and euroskeptics are waging the same
war? Whatever, roll on springtime� 2014!
Ludovic Subran