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Quo vadis, Europe? Desperately seeking a powerful recovery November 2014 www.ing-diba.de Carsten Brzeski Chief Economist
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Quo vadis, Europe? Desperately seeking a powerful recovery
November 2014
www.ing-diba.de
Carsten Brzeski Chief Economist
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Strong improvement in former problem countries…
-5
0
5
10
GR NL PT ES LU IT EZ FR AT DE FI BE
Change in economic sentiment since January 2014 (in %)
3
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...but it could be a cyclical upturn in a secular decline...
4
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...as demographics will weigh on LT-growth...
-1,0%
-0,5%
0,0%
0,5%
1,0%
1,5%
2,0%
2,5%
3,0%
Nig Mex Indo IN BR World US UK CH FR ES BE IT NL DE RU JP
Average labour force growth (YoY %) - def. as 15 - 64 y.o pop)
1990-2010 2010-2020
5
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…investments are missing…
6
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…and crisis years have dented investors’ confidence
7
0
200
400
600
800
1.000
1.200
1.400
1999 2001 2003 2005 2007 2009 2011 2013p
FDI inflows (bn USD)
Euro area inflows Rest of world inflows
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Labour market remains concern…
8
AT
BE
DE
FR
GR
SP
PT
IT
IR
NL
0
5
10
15
20
25
30
0 5 10 15 20 25 30
Un
em
plo
yment
rate
Septe
mber
2014
NAIRU
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…as high unemployment is not only cyclical…
9
20
25
30
35
40
45
50
55
DE FR IT OECD UK US
Labour tax wedge (% total labour costs)
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…and could lead to new (old) political risks
10
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11
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Not all is bad in Europe
12
62
8 79 10
18
54
28
42
3 4 5 68 9
23
28
35
49
0
10
20
30
40
50
60
US FI DE JP NL UK FR CN SP IT
WEF Int'l Competitiveness Ranking
2006 2014
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Bend it like Cruyff – “every disadvantage have its advantage”
• Current stagnation is also a chance
• Short-term fix needs the right policy mix…
• …of monetary, fiscal and structural policies
• Longer-term fix requires investment boost…
• …which increases structural growth…
• …and enhances Europe’s global competitiveness…
• …and international attractiveness
• Key areas for such an initiative are…
• …energy, high-tech and innovation
• But above all: a European vision and strategy
13
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Visionary investments in energy…
14
0
10
20
30
40
50
60
70
80
90
2005 2011 2005 2012
EU US
Total primary energy production (% of total consumption)
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…stimulating the high-tech sector…
15
4
6
8
10
12
14
2005 2006 2007 2008 2009 2010 2011 2012
Exports of ICT goods (% total goods exports)
EU World
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…and avoid a further brain drain
16
0
100000
200000
300000
400000
500000
600000
700000
2005 2006 2007 2008 2009 2010 2011 2012
No. patent applications per year (residential and non-residential)
EU United States China
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