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The EEAG Report on the European Economy 2013
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The EEAG Report on the European Economy 2013

Rebalancing Europe

Giuseppe Bertola, John Driffill, Harold James, Hans-Werner Sinn, Jan-Egbert Sturm and Ákos Valentinyi
CESifo Group Munich, 2013

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7

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For more than a decade, the European Economic Advisory Group’s economists have tracked the ups and downs of euro-zone economies. Their latest effort finds modest signs of hope and recovery, but identifies great differences between the northern and the southern single-currency members. In this report, the EEAG offers the distilled wisdom of six prominent economists who assess the European economy. They all agree that the very worst may be over for the crisis-hit euro zone, at least for now, but assert that only radical reform can significantly improve the competitiveness of Europe’s southern members. Though the threat is receding, the possibility remains that these nations could experience a massive deterioration that would deal a serious international economic blow. For those who seek details of the crisis across the diverse countries of Europe, charts, graphs and statistics lavishly illustrate this study. Its disadvantages are equally obvious: Letting six economists loose on a single piece of work invites a dose of committee-speak. Nonetheless, getAbstract welcomes the opportunity, through EEAG’s consistent reports –including this one – to consider economic trends over time.

Summary

The Outlook for Europe After the Crisis

The aftermath of the euro crisis strained the world economy, and the loss of economic momentum throughout the year 2012 contributed to the weakness going into 2013. Europe entered a period of stagnation after it had moved out of recovery mode. A downturn in industry in the leading economies also threatened global growth. Yet a global recovery is on the way, helped by more relaxed monetary policies in Western economies as well as in developing countries.

The troubled countries of Europe – Italy, Spain, Greece, Portugal, Cyprus and, to a lesser extent, Ireland – affected the greater world economy because of their large drop in import demand. Uncertainty led to a marked fall in flows of capital to developing economies in Eastern Europe, Latin America and Asia.

China appears to be on a path toward permanently lower growth rates. India’s growth has also waned since the beginning of 2012, while global high prices for soy and grains boosted Latin America’s exports. Brazil is gradually emerging from a period of slow expansion, but its impetus for new growth has come from increased consumption, not investment. The United States ...

About the Authors

The authors, all professors, are: Giuseppe Bertola of École des hautes études commerciales, Nice; John Driffill, of the University of London; Harold James, of Princeton; Jan-Egbert Sturm, of ETH, Zurich; and Ákos Valentinyi, of Cardiff Business School. Hans-Werner Sinn, of the University of Munich, is president of the CESifo Group.

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