Europe : Zero-Growth

The european economy’s landscape looks sad... The Eurozone saw its GDP lose 0.2% in the first quarter, and the OECD revised to the downside its forecast for 2013 and sees a 0.6% recession ahead. The OECD and the governments are hoping for a return to a positive rate, a meager 1%, in 2014, nothing more. Europe looks stalled.

Here are three observations that make this poor result even worse :

1) All European countries are concerned by this stagnation, even Germany (+0.1% in the first quarter) and the virtuous countries like Austria (0%), Finland (-0.1%) and the Netherlands (-0.1%). The South of Europe is suffering, but the North isn’t making up for it.

2) The people in charge in the governments and in the European union don’t really know why Europe is sinking into this economic slowdown. They blame the « austerity » measures and immediately come to the conclusion that they cannot refrain public expenditures to any significant degree, thus shying away from any meaningful structural reforms.

3) There is no clear perspective of recovery but the belief that, once the crisis is over, growth will come back, and all we have to do is wait. France represents the archetype of this behaviour, a mix of blindness and wishful thinking.

So, what do we do, with unemployment rising, debt growing and on-going deficits? We sit and wait, while patching holes with the monetary press. Worst of all, the OECD is encouraging this monetary laxism. This international institution did indeed declare, on May 29 : « New unconventional measures could be necessary in order to improve the transmission of monetary policies. Particularly, more asset buying could be envisaged. » Say what? The ECB will have to buy even more toxic assets?

Growth is much more than just an economic issue; there has to exist a certain ambition. What is Europe’s ambition today? Let’s recall that, in 2000, the European union had launched the « Lisbon Strategy », with the stated objective of making Europe « the economy of the most competitive and dynamic knowledge of the world from now to 2010, able to have durable economic growth along with improvements in employment, both quantity- and quality-wise. » One should always take such grand state programmes with a grain of salt, but at least there was some kind of will in there. Such a declaration would bring about a smile today. What are the ambitions of the young bachelors today? For those from France and the southern countries, it is to leave their country or become a government bureaucrat.

The absence of growth in Europe is looking like a resignation : resignation in the face of the weight of the State which seems impossible to scale down, resignation in the face of laxist monetary policies, resignation in the face of globalisation issues and international competition, which few countries attack head-on. In such a context, zero-growth is our only horizon.

Philippe Herlin has just published an e-book (in french) : « La révolution du bitcoin et des monnaies complémentaires ». Click here for more info.