Germany’s ongoing economic weakness suggests that the European Union’s long-term economic slump is not likely to end anytime soon. But with traditional laggards like Italy and France showing signs of recovery, and Central and East European members performing well, the bloc’s economic outlook could still take a turn for the better.
CAMBRIDGE – After 15 years of economic upheavals, from the European debt crisis to the COVID-19 pandemic and Russia’s invasion of Ukraine, the European economy appears set to underperform in 2024. But are appearances deceiving?
Germany, Europe’s largest economy, has been hit particularly hard by the surge in energy prices and China’s ongoing slowdown. Moreover, Germany has exacerbated its own economic woes by diluting or abandoning many of former Chancellor Gerhard Schröder’s market-oriented reforms, which had previously underpinned its robust GDP growth. Although leading German forecasters project that the country will (barely) avoid a recession in 2024, its economic outlook remains precarious.
France is faring slightly better. But with a fiscal deficit of 5.5% of GDP in 2023 and real interest rates rising globally, the French government is under pressure to tighten policy. On the other hand, after years of declining productivity and persistent debt issues, Italy is growing again and appears to be on a positive trajectory. And Greece, which maintains the European Union’s largest underground economy, continues to struggle, primarily owing to rampant tax evasion.
CAMBRIDGE – After 15 years of economic upheavals, from the European debt crisis to the COVID-19 pandemic and Russia’s invasion of Ukraine, the European economy appears set to underperform in 2024. But are appearances deceiving?
Germany, Europe’s largest economy, has been hit particularly hard by the surge in energy prices and China’s ongoing slowdown. Moreover, Germany has exacerbated its own economic woes by diluting or abandoning many of former Chancellor Gerhard Schröder’s market-oriented reforms, which had previously underpinned its robust GDP growth. Although leading German forecasters project that the country will (barely) avoid a recession in 2024, its economic outlook remains precarious.
France is faring slightly better. But with a fiscal deficit of 5.5% of GDP in 2023 and real interest rates rising globally, the French government is under pressure to tighten policy. On the other hand, after years of declining productivity and persistent debt issues, Italy is growing again and appears to be on a positive trajectory. And Greece, which maintains the European Union’s largest underground economy, continues to struggle, primarily owing to rampant tax evasion.