“If the EU continues to record the average rate of growth in labor productivity since 2015, given the aging of our society, in 25 years the economy will be the same size as today.” Mario Draghi said this at the annual Symposium of the Center for Economic Policy Research in Paris. “This means a future where tax revenues will be stagnant and there will be budget surpluses to prevent the debt-to-GDP ratio from rising.”
“If there are no reforms in 25 years, the EU’s GDP will be the same as today”
In short, without reforms and with a demographic decline in 25 years, EU GDP will be the same as today, the economist, a former number one at the ECB, reminded that spending will not fall. “We face spending commitments that will not be reduced along with GDP: unfunded pension liabilities in EU countries range from 150% to 500% of GDP; the Commission and the ECB estimate this amount to 750-800 billion euros per year. energy, defence, digitalization and invest in R&D, and this doesn’t even include important goals such as climate adaptation and environmental protection: these are all investments that will determine whether Europe remains inclusive, safe, independent and sustainable.”
“The low-wage export model is no longer sustainable”
The former Italian Prime Minister later declared that the low-wage export model was no longer sustainable. “European policies tolerated low wage growth as a means of increasing external competitiveness, further exacerbating the weakness of the income-consumption cycle. All governments had fiscal space to compensate for the weakness of domestic demand, but they consciously chose not to use it, at least until the pandemic.” “This field favors the exploitation of external demand and the export of capital at low wage levels: this situation no longer seems sustainable.” We now need to move away from work flexibility and very low wages and towards “retraining people”.
Next, let’s take a look at international stock markets. The slowdown in the Chinese economy has “increased Europe’s dependence” on the US market. “But the new US administration appears reluctant to serve as a buyer of last resort for us. We will face a deliberate US strategy to rebalance global demand and reduce the trade surpluses of its major partners.” This is precisely why we must insist on the single European market and the still dormant capital market, in order to find the resources necessary to face transitions and defense through public/private cooperation.
Source: Today IT
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
