An analysis of EU growth trends, with a particular focus on Germany, France, Italy and the UK

Pub. Date
30 January, 2007

The growing divergences in the growth performance of many developed world economies, and especially the size of the divergences presently being experienced between some of the EU's Member States, has provoked an ongoing debate in the EU regarding the implications of recent trends for future economic prospects. The "pessimistic view" of recent trends suggests that a significant number of Member States have as yet failed to recognise the extent of the reforms which need to be introduced given the challenges posed by an acceleration in the pace of technological progress, by globalisation and by the effects of ageing populations. The "more optimistic view" suggests that part of the explanation for Europe's poor performance could be measurement problems / adjustment lags, with perhaps the basis for future growth already firmly established due to the labour, capital and product market reforms which have already been introduced. Under this view the EU may now simply be in a transition phase whereby some of the negative effects of those reforms (e.g. a temporary decrease in productivity due to labour market changes) are visible, whilst the gains to be reaped in the future are not.