| Author (Corporate) | Progressive Economy |
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| Publisher | Progressive Economy |
| Publication Date | December 2015 |
| Content Type | Report |
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This report is an alternative piece of work challenging the European Commission's Annual Growth Survey (AGS), a centre-piece in the annual European Semester process. The AGS is the basis for the formulation of the EU's annual growth strategy, which guides the whole policy process up to the national stability and growth programmes, and reform programmes, between November until June of the following year. The AGS has been the main vehicle through which the European Commission has advocated the drastic austerity strategy which has dominated the European economic agenda for several years. In November 2013, a first 'iAGS' was produced by three independent economic institutes: This is the fourth independent Annual Growth Survey, each a response to the European Commission's AGS. The ongoing recovery of the EA economy is too slow to achieve a prompt return to full employment. Despite apparent improvement in the labour market, the crisis is still developing under the covers, with the risk of leaving long-lasting 'scars', or a 'scarification' of the social fabric in the EA. Moreover, the EA is lagging behind other developed economies and regardless of a relatively better performance in terms of public debt and current account, the current low rate of private investment is preparing a future of reduced potential growth and damaged competitiveness. So far, the Juncker Plan has not achieved the promised boost to investment. The internal rebalancing of the EA may fuel deflationary pressure if it is not dealt with through faster wage growth in surplus countries. Failure to use fiscal space where it is available will continue to weigh down on internal demand. Monetary policy may not succeed in the future in avoiding a sharp appreciation of the Euro against our trade partners’ currencies. Such an appreciation of the real effective exchange rate of the Euro would lock the EA in a prolonged period of stagnation and low inflation, if not deflation. A window of opportunity has been opened by monetary policy since 2012. Active demand management aimed at reducing the EA current account combined with internal rebalancing of the EA is needed to avoid a worrying 'new normal'. Financial fragmentation has to be limited and compensated by a reduction of sovereign spreads inside the euro area. Active policies against growing inequalities should complement this approach. Public investment and the use of all policy levers to foster a transition toward a zero carbon economy are ways to stimulate demand and respect the golden rules of public finance stability. iAGS 2016 hs been produced by 4 institutes: AK Wien (Austria), ECLM (Denmark), IMK (Germany) and OFCE (France). |
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| Source Link | http://www.progressiveeconomy.eu/content/iags-report-2016 |
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| Subject Categories | Economic and Financial Affairs |
| Countries / Regions | Europe |
