Growth and Adjustment Challenges for the Euro Area

Last week, I was one of the speakers at a workshop on the euro crisis at the Federal Reserve:  my paper is here.

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3 thoughts on “Growth and Adjustment Challenges for the Euro Area”

  1. The European Commission goal is to raise industrial output to 20% of GDP by 2020.

    Jürgen R. Thumann, president of the BusinessEurope lobbying group, told a conference this week:

    “…industry stands for 16% of European GDP. Industry delivers 80% of Europe’s exports. 80% of private sector Research and Development investment comes from manufacturing. And industry accounts for 45% of Europe’s workforce.

    Each job in the industrial sector is linked with at least two high quality jobs in the service sector. No doubt, a strong industrial base is vital for the future of Europe. Despite the fact that the European Union is still the largest industrial producer in the world, industrial production was is still 10% lower than before the financial crisis. More than 3 million industrial jobs have been lost. No question, the decline in Europe’s manufacturing represents a major problem and it is time to restore our industrial base.

    30 million European jobs depend on export markets outside Europe.

    Completing trade agreements with major partner countries could boost our output by up to 1.5%.

    Energy prices for European industry went up by 28% between 2003 and 2011, which is significantly higher than in most industrialised countries.

    Without taking energy cost into the equation you can bet that Europe will not achieve its 20 % industrial GDP target.”

    …an example of short-term gain at long-term cost?

    The El País newspaper reported Thursday that Spain was preparing to close down 48 out of a total of 127 rail lines in the country. Referring to a study by the Transport Ministry, the daily said the measure would save €86.5 million annually.

    El País said the lines cited for closure were currently used by some 1.6 million passengers per year, but covered only 16% of overall costs.

    …an example of positive returns from Italian reform:

    Italy has a positive example of reform: the Italian transport market was one of the first European markets to be fully liberalised and Ferrovie dello Stato Italiane, the state railway company, has been transformed from an unofficial public employment agency to a company that has reported a profit every year since 2008.

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