European Union is at a crossroads – Rabobank

Research Team at Rabobank suggests that the Eurozone is likely to witness continuing but rather weak economic growth of varying degrees between the individual Member States in 2017.

Key Quotes

“The average unemployment rate shows a slight downtrend and government finances are modestly recovering. However this situation, which will probably continue to dominate in 2017, is not likely to continue in the somewhat longer term. Not only is there reasonable doubt that the current monetary policy will still be sustainable, the expected growth rate is too low to resolve the major problems. As a result of the crisis, unemployment has risen to very high levels in a number of countries, especially among young people. In every southern European country, youth unemployment ﴾people under 25 years of age﴿ is higher than 25%; in France, this figure stands at around 20%. Even in a country such as Spain, which has made huge progress in policy in recent years, the current rate of growth is not enough to offer hope of real improvement. Large countries such as Italy and France are well behind the curve with structural reforms, and this is reducing their growth potential and standing in the way of a properly functioning labour market.”

“Politically, there will soon be elections in many European countries and big changes may be on the way. There is already widespread dissatisfaction with the effects of ‘Europe’ in many countries. There is a big chance that this dissatisfaction with weak development will be expressed in a protest vote, to some extent encouraged by the US elections and the Brexit referendum. How Europe will develop further in the coming years therefore depends on political choices, and this is therefore by definition unpredictable. These choices may work to the benefit of the economy, or not.”