Skip to comments.EU faces permanent loss of output
Posted on 07/03/2009 1:39:20 AM PDT by bruinbirdman
Europe is likely to suffer a permanent loss in potential economic output as a result of the global crisis, and government finances will be under pressure for years to come, according to a new European Commission study.
The crisis is the equivalent of capital destruction, reducing at least for a time the productive potential of the economy, the report says.
Current market disruption in financial markets and the more heavily regulated environment that is likely to follow can also be expected to have a permanent negative effect on potential growth, e.g. through reduced availability of capital for R&D and innovation activities.
The Commissions report on the 16-nation eurozones economy represents the European Unions first in-depth attempt to assess the long-term consequences of the crisis for economic growth and Europes public finances.
Its warnings are likely to reinforce the view of policymakers in countries such as Germany, Europes largest economy, and Sweden, which assumed the EUs rotating presidency on Wednesday, that Europe has absolutely no more room for fiscal expansion to combat the crisis.
The report notes that, even before the crisis, the eurozones potential economic growth rate was projected to fall from 2.2 per cent in 2007-2020 to 1.5 per cent in 2021-2030 and a meagre 1.3 per cent in 2041-2060.
The report says potential economic growth will slump to 0.7 per cent this year and in 2010, but predicts that it should make a gradual recovery over the medium term.
However, it cautions: Empirical evidence of the effect of past crises shows that the economy will not return to its pre-crisis expansion path but will shift to a lower one. In other words, the crisis will entail a permanent loss in the level of potential output.
According to the Commissions forecasters, the eurozones public debt will soar to 83.8 per cent of gross domestic product in 2010 from 66 per cent in 2007. Belgium, Greece and Italy will have debts above 100 per cent of GDP in 2010, Frances debt will be 86 per cent and Germanys debt will be 78.7 per cent.
In all, 11 of the 16 eurozone nations will have debts higher than the 60 per cent level that, according to EU treaty law, countries hoping to join the eurozone must meet.
The Commissions report suggests that matters may get even worse, saying: Further rising debt ratios in the years beyond 2010 can be expected. The current high deficit levels can indeed be partly seen as structural in the sense that the economy is likely to face a deceleration in its medium- to long-term growth prospects.
Long-term pressures on Europes welfare state will increase as the continent grapples with rising life expectancy, low fertility rates and a shrinking working-age population, the report says.
Almost half of the EUs population today is aged 50 or older, but by 2060 half will be aged 55 or older and there will be nearly twice as many elderly people as children, it predicts.
The Commission says it will be vital for EU governments to resist protectionist temptations and reject measures that promote national interests at the expense of the single European market.
Measures that reduce labour market participation, such as early retirement schemes, must also be avoided, it says.
Summing up the state of Europes banking sector, the report says: The most acute phase of the crisis
has now receded, but the situation remains fragile. Euro area banks are still highly leveraged, and persistent concerns about the quality of their assets have fuelled fears about the overall health of their balance sheets.
Wouldn’t have a thing to do with their idiotic cap and trade system, tho...
Sure wish this headline said “Obama faces permanent loss of output”
“Europe has absolutely no more room for fiscal expansion to combat the crisis.”
Translating - Europe is already overtaxed, so there is no room for further failed Keynesian approaches to the financial crisis that was brought on by socialism and Keynesianism.
The left will campaign on the easier platform of "Its all Capitalism's Fault"
They acknowledge your point right here:
the more heavily regulated environment that is likely to follow can also be expected to have a permanent negative effect on potential growth, e.g. through reduced availability of capital for R&D and innovation activities.
That nailed it and openly states that they understand it perfectly
The only clear motivation left is control
C&P is all about control
In one word, the EU is screwed, look at those debt vs gdp figures, technically, you are bankrupt.
One thing for sure, if the Islamo Fascists want to bring the West to its’ knees in a hurry, now is the time. Obama will do NOTHING but want to talk. I believe we will see a massive and devastating nuclear attack of some kind in the near future.
All of this trouble is created deliberately by The New World Order. The culprits in charge need to be identified and dealt with, or this economic problem is just going to continue and get worse.
Europe is likely to suffer a permanent loss in potential economic output as a result of the global crisis, and government finances will be under pressure for years to come, according to a new European Commission study.You know what will help? Having Obama in the White House. He'll definitely help destroy the European economy, and blame Congress for it.
Destruction and worldwide chaos is his agenda....and it’s working.
Someone finally wrote it up correctly— except I would title it “Obama’s plan for America....”
I have read more than a few articles stating the same/similar facts about the EU &/or member states, like Germany. So, I am curious: why does the Euro remain so high? The same conditions and questions apply to the GB Pound. Japan has been bumping along on the bottom for over a decade, yet the Yen remains high, as well. Can you explain that to the forex-challenged, in lay terms?
No worries — their soon-to-be-permanent Muslim majority will get around to solving that problem in no time. Labor will be needed to demolish Churches, desecrate graveyards, jail people for not wearing headrags, etc.
So basically, all those rules and regulations are coming back to screw them.
Western Europe is in a secularist death-spiral
This is PRECISELY due to TWO factors:
1) Socialism and its dual effects: the reduction of incentive for capitalists to create more wealth for themselves and their kin; and, high payouts to social welfare parasites and pensioners, especially government workers. This environment also inevitably results in a reduction of religious participation and lower birth rate.
2) Radical environmentalists and the crippling of the European economy via regulation and taxation.
Yes, Cap and Trade is part of this problem - and it is right now a very significant part.
When looking at those figures of lower growth by a percent or two, it is CRITICAL TO REALIZE that the difference between the standards of living of the United States and Africa is ONLY 1% PER YEAR DIFFERENCE IN GROWTH over the history of the United States. That 1% compounded over time creates a huge disparity, so be certain to take to heart that the lower growth rates mentioned in this article are meaningful.
>One thing for sure, if the Islamo Fascists want to bring the West to its knees in a hurry, now is the time. <
they better hurry of they want a crack at us, Obama is killing us faster than they ever could.
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