Business investment hurt by Brexit

By Magali Dauvin

At a time when the outlook for world trade outlook remains glum [1], British domestic demand is struggling to remain dynamic: household consumption has run out of steam at the end of the year, while investment fell by 1.4 points in 2018.
This latest fall can be attributed almost entirely to the investment of non-financial corporations [2] (55% of GFCF in volume), which fell consecutively during the four quarters of the year (Figure 1), for a total fall of -3.7% in 2018. Continue reading “Business investment hurt by Brexit”

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The euro is 20 – time to grow up

By Jérôme Creel and Francesco Saraceno [1]

At age twenty, the euro has gone through a difficult adolescence. The success of the euro has not been aided by a series of problems: growing divergences; austerity policies with their real costs; the refusal in the centre to adopt expansionary policies to accompany austerity in the periphery countries, which would have minimized austerity’s negative impact, while supporting activity in the euro zone as a whole; and finally, the belated recognition of the need for intervention through a quantitative easing monetary policy that was adopted much later in Europe than in other major countries; and a fiscal stimulus, the Juncker plan, that was too little, too late. Continue reading “The euro is 20 – time to grow up”

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Brexit: Roads without exits?

By Catherine Mathieu and Henri Sterdyniak

The result of the referendum of 23 June 2016 in favour of leaving the European Union has led to a period of great economic and political uncertainty in the United Kingdom. It is also raising sensitive issues for the EU: for the first time, a country has chosen to leave the Union. Continue reading “Brexit: Roads without exits?”

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The 2018 European economy: A hymn to reform

By Jérôme Creel

The OFCE has just published the 2018 European Economy [in French]. The book provides an assessment of the European Union (EU) following a period of sharp political tension but in an improving economic climate that should be conducive to reform, before the process of the UK’s separation from the EU takes place. Continue reading “The 2018 European economy: A hymn to reform”

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Brexit: Pulling off a success?

By Catherine Mathieu and Henri Sterdyniak

Will the EU summit of 14-15 December 2017 usher in a new phase of negotiations on the exit of the United Kingdom from the European Union?

British Prime Minister Theresa May wants to make Brexit a success and to arrange a special partnership between the UK and the EU, a tailor-made partnership that would allow trade and finance to continue with minimal friction after the UK leaves the EU, while restoring the UK’s national sovereignty, in particular by regaining the ability to limit the immigration of workers from the EU and by no longer being subject to the European Union Court of Justice (EUCJ). For the EU-27 countries, on the contrary, it must be made clear that leaving the EU incurs a significant economic cost, with no significant budgetary gain, that those who leave must continue to accept a major share of European rules and that they cannot claim the benefits of the single market without bearing the costs. Other Member States should not be tempted to follow the British example. Continue reading “Brexit: Pulling off a success?”

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A new Great Moderation?

by Analysis and Forecasting Department

This text summarizes the OFCE’s 2017-2019 forecast for the global economy and the euro zone; the full version can be found here.

Ten years after the financial crisis broke out in the summer of 2007, the world economy finally seems to be embarking on a trajectory of more solid growth in both the industrialized and most of the emerging countries. The figures for the first half of 2017 indicate that global growth is accelerating, which should result in GDP growth of 3.3% over the year as a whole, up 0.3 percentage point over the previous year. Some uncertainty remains, of course, in particular concerning the outcome of Brexit and the ability of the Chinese authorities to control their economic slowdown, but these are the types of irreducible uncertainties characteristic of an economic system that is subject to political, technological, economic and financial shocks[1]. Continue reading “A new Great Moderation?”

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The European economy in 2017 – or, the post-Brexit EU

By Jérôme Creel

The just released L’économie européenne 2017 provides a broad overview of the issues being posed today by the European Union project. Brexit, migration, imbalances, inequality, economic rules that are at once rigid and flexible… the EU remains an enigma. Today it gives the impression of having lost the thread of its own history or to even to be going against History, such as the recent international financial crisis or in earlier times the Great Depression. Continue reading “The European economy in 2017 – or, the post-Brexit EU”

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An end to growth?

Analysis and Forecasting Department (international team)

This text relies on the 2016-2018 forecast for the global economy and the euro zone, the full version of which is available here, in French.

After avoiding a Grexit in the summer of 2015, Europeans will now have to face a Brexit. In addition to what should be a significant impact on the UK economy lies the question of the effect this shock will have on other countries. Given that all the indicators seemed to be green for finally allowing the euro zone to recover from the double-dip recession following the 2007-2008 financial crisis and then the sovereign debt crisis, will a Brexit risk interrupting the trend towards a recovery? This fear is all the more credible as the delayed recovery was not sufficient to absorb all the imbalances that built up over the years of crisis. The unemployment rate for the euro zone was still over 10% in the second quarter of 2016. A halt to growth would only exacerbate the social crisis and in turn fuel doubt – and therefore mistrust – about Europe’s ability to live up to the ambitions set out in the preamble to the Treaty on the Functioning of the European Union and reiterated in Lisbon in 2000. Continue reading “An end to growth?”

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Britain’s referendum of 23 June 2016: The leap into the unknown

 

By Catherine Mathieu

On 23 June 2016, the British people decided (by 52% to 48%) to leave the European Union. After having long criticized the functioning of the EU and the constraints that it placed on the United Kingdom, on 19 February 2016 David Cameron obtained an agreement intended to allow the UK to remain in the EU – but it was not enough to convince the voters. In an OFCE Policy Brief (No. 1 of 13 July), we analyze how the British people’s concerns went beyond economic issues and that what counted was their desire to maintain (or regain) their political sovereignty. Continue reading “Britain’s referendum of 23 June 2016: The leap into the unknown”

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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 Juppé 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. Continue reading “Europe is dead – Long live Europe!”

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