Title: The future of Europe's economy: Disaster or deliverance?
Abstract: Europe’s economy is finally showing tentative signs of stabilising. But does this mark the start of a robust recovery, or is it, in the language of the markets, a ‘dead cat bounce’? The Centre for European Reform asked four leading European economists to predict how things would look in 2020. Their answers differ sharply. The future of the European project will to a large extent depend on which of the four authors is most right. If the eurozone as a whole, and its debtor states in particular, suffer prolonged stagnation and funding crises, popular faith in European integration could be hit hard. Aside from casting doubt over the future of the euro, the damage to the EU’s single market, perhaps Europe’s biggest economic asset, and to relations between memberstates would be considerable. Conversely, if the eurozone stages a sustained economic recovery, and the currency union’s debtor countries are able to honour their debt burdens while engineering a bounce-back in living standards, the outlook for the euro (and the EU more generally) will be much brighter. Holger Schmieding is optimistic. He believes that by 2020 the eurozone countries that are today in difficulties will be reaping the rewards of structural reforms and that the eurozone will be stable. Indeed, it will be best of all worlds – a currency union without moral hazard. For George Magnus, the outlook is less bright. Rapid population ageing, weak productivity and a divided eurozone have conspired to produce the most significant threats to Europe’s economy and the legitimacy of its political institutions since the 1930s. Paul De Grauwe also fears for the future. If the eurozone is to flourish, its creditor countries must share the burden of reducing the currency union’s imbalances. They need to do more to stimulate their economies and accept debt relief for the hard-hit economies. Thomas Mayer suspects that fiscal discipline in the eurozone will crumble and that the ECB will be forced to monetise debt, leading to higher inflation in northern Europe. The result will be a stand-off and the launch of a German-led parallel currency to compete with the euro.
Publication Year: 2013
Publication Date: 2013-01-01
Language: en
Type: article
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Cited By Count: 1
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