Scenarios for the European economy

Policy Study

This contribution, elaborated in the frame of the collaboration between FEPS and Economic Council of the Labor Mouvement (ECLM) argues for a true coordinated macroeconomic strategy for Europe. It suggests dividing national budget deficits into an operational part, including public consumption and transfers, and an investment-related part”

“Over the summer, the outlook for the international economy has become far more uncertain. Indeed, despite the fact that the expected growth in Europe has already been downgraded, it is not unlikely that the growth will be even lower. On one hand, there are European countries that have such unsound public finances that they require immediate consolidation. These countries are not able to stimulate the economy at the moment but should focus on getting their deficits under control. On the other hand, one might question whether it is appropriate that so many European countries tighten fiscal policy simultaneously. When nearly all European countries tighten their finances simultaneously, it hits the economies extra hard as they experience both domestic tightening and lower demand from their trading partners and therefore lower exports, increasing the extreme difficulties of the European economy. Therefore this paper argues for a true coordinated macroeconomic strategy for Europe. It suggests dividing national budget deficits into an operational part, including public consumption and transfers, and an investment-related part”

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