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Europe is dead – Long live Europe!

By Maxime Parodi and Xavier Timbeau

The British people’s vote for Brexit merely reinforces the political logic that has become an imperative. On the one hand, people want to be consulted, while on the other, Europe is summoned to change. François Hollande believes that, “the vote of the United Kingdom is putting Europe to the test”; Alain JuppĂ© holds that, “we must write a new page, a new chapter, in the history of Europe”; the leaders of France’s National Front, but not they alone, are calling for a referendum on France’s membership in the EU and in the euro. Throughout Europe, debate along these same lines is underway. suite…»

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Brexit: What are the lessons for Europe?

By Catherine Mathieu and Henri Sterdyniak

The British vote to leave the European Union is aggravating the political crisis in Europe and in many European countries. Leaving the EU has become a possible alternative for the peoples of Europe, which may encourage parties advocating national sovereignty. The United Kingdom’s departure automatically increases the weight of the Franco-German couple, which could destabilize Europe. If Scotland leaves the UK to join the EU, independence movements in other regions (Catalonia, Corsica, etc.) could seek a similar outcome. But the fragility of Europe also stems from the failure of the strategy of “fiscal discipline / structural reforms”. suite…»

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The effects of the oil counter-shock: The best is yet to come!

By Eric Heyer and Paul Hubert

After falling sharply over the past two years, oil prices have been rising once again since the start of the year. While a barrel came in at around 110 dollars in early 2014 and 31 dollars in early 2016, it is now close to 50 dollars.

Will this rise in oil prices put a question mark over the gradual recovery that seems to have begun in France in 2016?

In a recent study, we attempted to answer three questions about the impact of oil prices on French growth: will a change in oil prices have an immediate effect, or is there a time lag between the change and the impact on GDP? Are the effects of rises and falls in oil prices asymmetrical? And do these effects depend on the business cycle? The main results of our study can be summarized as follows: suite…»

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What Donald Trump’s economic programme reveals

By Xavier Ragot

The US elections are proving to be very revealing. Three different perspectives on the current elections are yielding insights into three areas: first, on the state of the US economy, second, on the state of the thinking of economists, and finally, on the nature of the relationship between economists and politicians.

The US primaries were marked by both the “resistible rise” of Donald Trump and the emergence of Bernie Sanders, who has hit Hilary Clinton from the left but failed to win. suite…»

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Is the decline of industry due to the growth of services?

By Sarah Guillou

On Friday, April 8 2016, the Observatoire Français des Conjonctures Economiques (OFCE) began a series of quarterly seminars on the analysis of France’s productive network. The purpose is to bring together researchers and discussion of the situation, the diversity and the heterogeneity of the companies making up France’s production system. This discussion is now being fed by the increasing use of business data. We hope in this way to enrich the analysis of the strong and weak points in the country’s production fabric, with a view to guiding the development of public policies aimed at strengthening it.[1] suite…»

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Small recovery after a big crisis

By the Analysis and Forecasting Department

This text summarizes the 2016-2017 outlook for the global economy and the euro zone. Click here to consult the complete version [in French].

Global growth is once again passing through a zone of turbulence. While growth will take place, it is nevertheless being revised downwards for 2016 and 2017 to 2.9% and 3.1%, respectively. The slowdown is first of all hitting the emerging countries, with the decline in Chinese growth continuing and even worsening (6.1% anticipated for 2017, down from 7.6% on average in 2012-2014). The slowdown in Chinese demand is hitting world trade and fuelling lower oil prices, which in turn is exacerbating the difficulties facing oil and commodity producers. Finally, the prospect for the normalization of US monetary policy is resulting in a reflux of capital. The dollar is appreciating even as the currencies of the emerging countries of Asia and Latin America are depreciating. While the industrialized countries are also suffering from the Chinese slowdown through the demand channel, growth is resilient there thanks to falling oil prices. The support provided by monetary policy is being cut back in the US, but is strengthening in the euro zone, keeping the euro at a low level. Countries are no longer systematically adopting austerity policies. In these conditions, growth will slow in the US, from 2.4% in 2015 to 1.9% in 2016 and then 1.6% in 2017. The recovery will pick up pace slightly in the euro zone, driven mainly by the dynamism of Germany and Spain and the improved outlook in France and Italy. For the euro zone as a whole, growth should come to 1.8% in 2016 and 1.7% in 2017. This will push down the unemployment rate, although by year-end 2017 it will still be 2 points above its pre-crisis level (9.3%, against 7.3% at year-end 2007). suite…»

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Unemployment: beyond the (good) figures from France’s job centre

Analysis and Forecasting Department (France team)

The 60,000 person decline in March for the number of people registered in Category A at France’s PĂ´le emploi job centre is exceptional. One has to go back to September 2000 to find a fall of this magnitude. There is some natural volatility in the monthly statistics for job seekers, but the fact remains that the trajectory has changed noticeably. In the last year, the number registered in Category A at the job centre rose by 17,000. A year earlier, from March 2014 to March 2015, the increase was 164,000. Better yet, over the last six months the number registered fell by 19,000. suite…»

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The national living wage: a new means to boost low wages in the United Kingdom

By Catherine Mathieu

On 1 April 2016, a national living wage (NLW) took effect in the United Kingdom. This may come as a surprise to France, where the UK labour market is considered the epitome of a deregulated market. This new minimum wage, the NLW, adds 50 pence to the existing minimum hourly wage (the National Minimum Wage, NMW) for those over age 25, meaning a rise from ÂŁ6.70 to ÂŁ7.20, or 7.5%. This follows a 3.1% increase in the minimum wage in October 2015 for those over age 25 (from ÂŁ6.50 to ÂŁ6.70), for a total increase in one year of 10.8%. This sharp increase in the minimum wage does not represent a sudden change of course by the government. The Conservative election platform for the 2015 parliamentary elections already promised a raise in the minimum wage and pointed towards the introduction of a living wage. The announcement that the NLW would be established was made in July 2015, during the presentation of the budget by George Osborne, Chancellor of the Exchequer, following the Conservatives’ election victory. This is simply the first step in an effort to raise low wages, as the government has a target of increasing the NLW to 60% of the median wage by April 2020 (up from 55% at present), to about 9 pounds.[1] suite…»

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Can steel revive Europe’s industrial policy?

By Sarah Guillou

The situation of the European steel industry was on the agenda of the European Council’s Competitiveness session held on Monday, 29 February 2016. One of the Council’s conclusions was to issue a demand to speed up the anti-dumping investigations by two months. This demand follows a letter sent on 5 February to the European Commission by ministers from seven European countries, including France, Germany, Italy and the United Kingdom, urging it to take measures to protect the steel sector vis-Ă -vis what was deemed unfair competition from China and Russia. suite…»

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The ECB is extending its QE programme but mixes up its communications

By Paul Hubert

On Thursday, March 10, after the meeting of its Governing Council, the European Central Bank (ECB) announced a series of additional measures for the quantitative easing of monetary policy. The aim is to prevent the onset of deflation and to boost growth in the euro zone. The key innovation lies in the measure for bank financing at negative rates. While the measures were well received by the markets at the time of the announcement, a lapse in Mario Draghi’s communications during the press conference following the Board of Governors meeting greatly undercut some of the impact expected from the decisions taken. suite…»

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