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12/27/16

EU Forecast 2017; Three trends that will continue hurting the eurozone in 2017 – by Ilaria Maselli

In a referendum earlier this month, Italian voters dealt a knockout blow to their prime minister’s proposed reform agenda. He declared his resignation that very night.

Disdain for the current crop of politicians extends throughout Europe, with uncertainty surrounding the 2017 elections in the Netherland (March), France (May), and Germany (September.

On top of all of this comes the start of the Brexit negotiation, presumably in March. How will Theresa May manage to ensure that companies but not people retain the freedom of movement? For the rest of the EU, more than an economic challenge, the negotiation poses an existential challenge: does the eurozone need more or less integration to fix its economy and address the uncertainty? And if the answer is “more” what are the policies needed? Eurobonds? A common unemployment insurance scheme? More redistribution across regions?

This lack of confidence almost always puts the brakes on economic growth, since it pushes companies to postpone hiring and delay investment decisions. Moreover, recent research reveals that the most productive companies – those that have the most to lose from taking risks – demonstrate the strongest wait-and-see attitude. A protracted state of uncertainty can therefore permanently affect the productivity, innovation and growth performance of even the best companies.

Read more; Three trends that will continue hurting the eurozone in 2017 – EurActiv.com

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