| Click for the Finfacts Ireland Portal Homepage |

Finfacts Business News Centre

 Irish Economy
 EU Economy
 US Economy
 UK Economy
 Global Economy
 Asia Economy

Finfacts changes from 2015


How to use our RSS feed

Follow Finfacts on Twitter

Web Finfacts

See Search Box lower down this column for searches of Finfacts news pages. Where there may be the odd special character missing from an older page, it's a problem that developed when Interactive Tools upgraded to a new content management system.


Finfacts is Ireland's leading business information site and you are in its business news section.


Finfacts Homepage

Irish Share Prices

Euribor Daily Rates

Global Cost of Living

Irish Tax - Income/Corporate




Content Management by interactivetools.com.

News : EU Economy Last Updated: Mar 26, 2015 - 7:33 AM

Long-term Euro Area growth prospects grim even at pre-crisis jobs/investment rates
By Michael Hennigan, Finfacts founder and editor
Mar 20, 2015 - 7:38 AM

Email this article
 Printer friendly page

Mario Draghi, ECB president, officially opening the ECB's new Frankfurt premises, Mar 18, 2015

An ESRI research note published today says long-term growth prospects for the Euro Area are grim even if unemployment and investment return to their pre-crisis rates by 2020.

The research note authored by Kieran McQuinn, associate research professor, Economic and Social Research Institute, and Karl Whelan, professor of economics, University College Dublin, is based on joint ESRI-UCD work entitled “Europe’s long-term growth prospects: With and without structural reforms,’’ updates earlier calculations by the same authors in a 2008 paper and provides projections of Eurozone growth out to 2060, based on recovery scenarios related to the 2008 economic crisis and long-term demographic trends. The research on which the note is based also examines the implications of three significant structural reforms on European growth rates.

Overall, the authors say the findings are sobering for those expecting economic growth to deal with the Euro Area’s debt problems over the next decade. Among the results reported are the following:

1. The working age (15 to 64) population of the Euro Area has been declining since 2010.

2. An average real GDP growth of just over half of one per cent per annum over the next decade is projected even if unemployment and investment return to their pre-crisis rates by 2020.

3. The adoption of significant and ambitious labour market as well as product reforms across the Euro Area would improve GDP growth by just 1% per annum.

4. The research concludes by calling for a significant joint Euro Area funded capital investment programme which would address the large output gap and increase the supply-side potential of the European economy.

The note also says that Total Factor Productivity (TFP) growth in the Euro Area has almost ground to a halt: it averaged 0.2% per year over the period 2000-2013 while the ongoing slump in investment is having negative supply-side effects: low capital stock growth is subtracting about 0.6% per year from potential output growth.

Kieran McQuinn said: "Over the longer-term, Europe needs a plan for dealing with a pattern of population ageing that is set to have enormous effects on its growth potential. Policy initiatives to delay retirement ages and to encourage labour force participation are undoubtedly part of the solution to the problems posed by ageing. However, these initiatives are likely to be very unpopular politically and may have negative implications for productivity. A policy of large planned increases in the amount of immigration into the EU, while also politically challenging, may turn out to be the only way to keep the European economy expanding in the future.”

UK "underlying growth has stopped"

Last December Dr Martin Weale, a member of the Bank of England Monetary Committee (MPC), compared the UK’s recent productivity growth to that of other developed countries and considers what their experiences might tell us about the causes of weak productivity.

He said in a speech that “the UK is not alone in having weak productivity growth recently.” In fact, the relationship between pre and post crisis productivity in the UK is similar to that of twenty-three other developed countries, suggesting “our experience is far from unique”. And, like the UK, these countries now have productivity growth rates which are “at best only very weakly correlated with those in the period before the crisis.”

Turning to the implications for monetary policy should productivity growth be weaker than the MPC expects, Dr Weale noted: “Persistently slower productivity growth would have two implications for interest rates; in the short term, interest rates would need to be higher in order to prevent demand running ahead of supply. But over the medium term, interest rates may remain lower than they were before the crisis, reflecting weaker underlying growth.” However, “the MPC does not have the luxury of being able to wait for the fog of uncertainty over productivity growth to clear up. Exploration of recent trends provides some help, but understanding what they imply for the future remains essentially a matter of individual judgement.”

Related Articles

© Copyright 2015 by Finfacts.ie

Top of Page

EU Economy
Latest Headlines
Spain's strong recovery to slow in the next few years
Italy's Mezzogiorno is Achilles' heel of Euro Area - lowest birth rate since 1862
Euro Area GDP grows at weak 0.3% in Q2 2015
German GDP up 0.4% in Q2 2015; France's GDP stagnates
Germany's Surplus: Lots of critics; Credible solutions scarce
Euro Area industrial production dips in June and May after a flat April
Greece faces two years of recession according to EU officials
High EU youth unemployment rate not as bad as it seems
Eurozone retail PMI surges to highest since January 2011
ECB monetary policy still tight for Southern Europe
German exports fell in June — surplus at record; Exports up 13.7% year-on-year
Eurozone manufacturing sector continued to expand in July
Weak euro unlikely to have significant impact on Euro Area growth
Is Euro Area Ireland's top trading partner?: EU28 is overwhelmingly UK's
German car firms boost exports from Spain, UK, Portugal, Czech Republic, Slovakia, Hungary and Romania
Flash Eurozone manufacturing/ services PMI close to four-year high despite Greek crisis
Krugman calls euro a Roach Motel; Hotel California gets 1-star grade
Greece & Euro Crisis: July 2015 articles from Finfacts
Greece and other poor countries in Euro Area will not become rich
Euro Area manufacturing/ services PMI hits four-year high in June
Western European car market: Recovery continues
Greece could become a failed state like Venezuela
Multinational companies pay on average 30% less tax than domestic competitors in EU
EU's list of 30 tax havens omits the biggest 4 in Europe
China to invest in Juncker's European investment fund
Greek talks collapse; Game theorists gambling with future — Germany's vice-chancellor
German exports and industrial production in strong rises in April
Tackling Inequality: Scandinavian countries have the most successful welfare systems in Europe
Eurozone unemployment fell by 130,000 in April 2015 — down 849,000 in 12 months
Eurozone service sector business activity slowed during May
German 2015 GDP forecast cut; Jobless level at 24-year low
Eurozone manufacturing in modest acceleration in May
FDI into Europe at record in 2014; UK on top: Germany location for future investment
Eurozone economy loses growth momentum; Jobs growth rises
Athens leak suggests Juncker has plan for Greece
Draghi will not end QE early but warns of risks
Eurozone grows faster than US and UK in Q1 2015
German GDP at slower pace, France faster in Q1 2015
Germany may cut income tax; Germans still shun risky investments
Germany had record exports and imports in March 2015