Upbeat forecast for EU economy

The European Union Economic Forecast from here:
European Economic Forecast. Spring 2020 - 06 May 2020

Excerpt (May 6, 2020):

The rebound is never quick-enough from the one we've had here in Europe. But, I suspect that what is happening is that a Truly World Economic Forecast should indeed be positive and thus including the EU. There has been no horrible world-war (except in a medical sense) and country economies have not been totally devastated. They are recuperating, if only slowly.

The recovery will cost most of the rest of this year in timing as the EU "get's back into gear". But next year for Europe shows a highly positive growth forecast of a bit more than 6%.

That's economic goodness ...

 

The EU is re-allocating and borrowing up to EUR750 Billion (5.6%) of GDP in the program "Next Generation EU" this is on top of the "Safety Net" (In mid-April, the European Heads of State agreed on a three-layer safety net totaling €540 billion or 3.9% of the EU's GDP) so the safety net and the Next Generation EU plan represent a fiscal response of 9.3% of the EU's GDP. Don't forget that this is on top of the support given by individual states to their own economies which in some cases is about 25% of GDP. This will have consequences to the EU and growth, the funds are going to be raised from the capital markets with but significant amount is coming from higher taxes. The issue with the EU is its asymmetry and whilst the amounts above are large they only represent working capital and do not address the structural economic issues that have hit individual countries - some harder than others. I think it will take decades for the EU (and perhaps the rest of the world) to recover and offload the accumulations of sovereign debt that the EU/ECB will have to absorb.

 

I don't know how old that figure is (?) but its now looking at around 5.5% and that may well be revised downwards very soon.

 

Let's wait and see ... but there are a few developments in the European economy that will bring about a significant change for the future ... or let's say can bring.
For example, the point "local for local" has become much more attractive when it comes to purchasing from suppliers and also in production.
Are we honest ... in the "before - Corona period" people were shopping and producing all over the world and the only thing that counted here was the price and nothing else in the end. For many things, for example electrical and electronic components or magnets, almost all of them came from China. Other things too, or from other countries on the other side of the planet ...

However, that has now changed due to the supply chains interrupted and disturbed by Corona and on many management floors the virus has made the risk aware of the future or let's say more consciously. So you go there increasingly, e.g. to generally advertise things in Europe for European suppliers and send out RFQs (Request For Quotation). Of course, the price continues to play a role, but often you are willing to dig a little deeper into your pocket when it comes to the price, because the fact that a European company seldom has the same or cheaper price than a Chinese supplier is at least clear to most managers. Delivery security has become a little more important
That can also influence the economy in Europe ... positively influence it.

 

Typically, after such calamities, companies go back to the "old way" of doing things. Because people are trained in that manner to do their jobs. I don't see anything new on the horizon in terms of management-psychology changing overnight. Old habits die hard.

What had begun is going to continue. That is (as a I never ever tire of saying) the Industrial Era is giving way to the Information Era. Industrial production will stagnate around existing methods for products that do not basically change. For instance cars, or home appliances. What happens is that the production can get shipped off-shore if the products will allow it.

But when a company has a massive investment in production, it will likely not want to shift all that machinery off to North Africa because manpower-rates are so much cheaper. VW is making products in Spain nowadays, and I suspect that is the furthest south its car production for European markets will get.

Much cheaper cars are a possibility for production in North Africa, but does VW want to produce/sell cheaper cars? The question thus becomes one of Marketing Strategy - which is mostly determined by Corporate Profit Objectives. Different companies, all in the same market ("cars" for instance), will try different strategies in the same general market.

 

...sure enough...its going to take a while for things to crystalise and get a handle on how economies will recover.
Not sure about your thoughts on supply chains though? The majority of cargo movements all modes have shown a good degree of resilience.

 

Lets see what the openings bring, the borders and public live. Right now I am holding my breath.
Vacation time is coming and people do not behave responsible during vacation.

We see what is happening in the US.

I would say any predictions what will happen in 2012 are wild speculations.
Without a vaccine all bets are of.

 

EVER TAKE A VACATION AND DIE?

Then, depending upon their age, they may die of Covid-19 infection. Do you think the majority of Americans will then understand?

The death-rate is already rebooted! See here:



Wakey, wakey ...

PS: Wear that effing mask!!!!!!!

 

STANDARDS OF PREVENTION

No doubt. When SARS hit China (2002/4) the WHO funded research to find an anti-dote. It gave up the funding in 2010 or so. Finding an adequate solution (for all circumstances) was an endless pit for research funding.

OK, so we learned and this time around its gonna-be a lot different? (Uh, not really!)

You know - life teaches us early-on that all encompassing solutions to human physical-problems is a Verrrryyy long-term undertaking ...

From the Guardian, here: Coronavirus vaccine tracker: How close are we to a vaccine? - excerpt:

There aint no easy way out of this pandemic and there are early signs that such pandemics - this is the second one in almost 20 years - are becoming an integral part of our life-style. Which means what?

That our standards of prevention must be MUCH HIGHER than presently exist. Blithely getting on a plane-to-everywhere must be much more "controlled for disease" before boarding* ...

*Either that or you wear a mask for the entire duration of the flight. What great fun that is!

 

I have to correct myself not 2012 but 2021.
What will happen to the economy this year and next year will all depend how any new outbreak, clusters and so on will be controlled in the EU countries.
Will people be responsible enough, social distancing, wear a mask ?

Since I work in my business with the public, I got used to wear a mask and a face shield, so used that I wear both when ever I am in public, like stores.
I do that since early March.

 

I've posted the EC's preview of economic activity on this thread (I think) and its positivity might well be "wishful thinking". But, I doubt it.

We-the-sheeple here in Europe went through a very tight "lockdown". In the first months, in order to leave the house, I had to fill out a sheet showing the various reasons for doing so (mostly just to go to the supermarket). I had to have that document dated and with me in the car if stopped by the police. If I did not have that document, I was fined heavily.

The intent was to make sure people only went shopping in supermarkets (because all other shops were closed) and could do so - where they wore their masks. And still do to this day.

You in the states had Donald Dork saying that it was all a hoax in the early days. And he is still pushing that notion with his wildly assinine comments about "how well we are doing to beat the danger". Or some such.

He's probably still popping his hydroxychloroquine but studies show that it has a positive effect only on those who are oxygenated. It does not prevent anyone from contagion.

All that means little if a second covid-19 attack occurs, and it could well happen. But, at least here in Europe, people are convinced that the menace is real and pertinent. They take it seriously. We may have "unlocked" for summer but people here in France are still wearing masks whilst shopping in mixed crowds. Not all adults, and particularly not the teenagers who think they are indestructible.

What the French (and the Latin-language southern countries) wanted most was to be able to have coffee/tea outside the café, which is most common throughout the year until it really gets cold. And it was not about the coffee! They simply wanted to "mingle" because that is what they have always done ...

PS: Jerko LOST the popular election last time and he will lose it even worse this time - the difference being that not even the manipulations of the Electoral College will likely be able to save his sorry presidential arse this time around.

 

I speak German and English fluent, read French and Spanish, Dutch is not difficult to read, so I am very able to get information from the horses mouth.
How difficult the opening is we can see in the hot spots in Germany, for example Goettingen, or the new one in Spain.
That's why I say, predicting how much the economy in Europe will grow in 2021 is reading the chrystal ball, Kaffeesatz.
Nice if it would happen.
But letz talk about in 3 month or so, we might have than an idea, how all that opening and c19, is working.

 

It WILL happen - the economic recovery, that is.

Once beyond the deaths from Covid-19, the economy will begin to function even better than before in Europe. Because Europe has seen economic-growth lower than past-years. It was very seriously affected by the 2008 Great Recession and that was more than a decade ago.

Europe never regained its growth rate known prior to 2008 (the Great Recession):


That goal should be the primary objective for the EU Commission in Brussels ...

 

Did you read the interview Schaeuble gave the FAZ.
Rather interesting.

 

According to these guys...

https://www.bundesbank.de/en/press/...nomy-will-recover-after-deep-recession-834296

... Germany will spend most of 2020 being seriously ****ed and spend the next two years climbing out of the resultant recession.

I hope that they are wrong. If the Germans go under it won't do the UK economy much good. But the forecast was made by the German Central Bank, so I am not holding my breath.

 

I think that is a realistic forecast, it will be a slow and hard climb out of the recession. Germany will have to lead the way in Europe. It will be a very complicated task, since one of its main industries, cars, is now making the switch to EVs and is struggling.
Than you have Italy, Spain, Portugal and parts of France which need a solid tourism business. Without a vaccine you can not have that.

I hold my breath, too.

 

Look, there is no reason whatsoever that "going under" should happen. There has been a serious downturn in Aggregate Demand. That's all. This happens regularly - just not at the magnitude we've seen this year.

Unperturbed by a military invasion, economies have a knack for resuming Demand after a downturn. Some call it "maintaining a decent standard-of-living". Regardless of what one may call it, aggregate Demand is difficult to undo. People "get used to it". It's also an indisputable fact of human-nature.

European deaths due to Covid-19 have been substantial but certainly not enough to undermine seriously Demand for goods/services in Europe. I am less sure about the US, however, the way the death-rate is getting seriously out-of-hand. But that just means "the deeper you go into the economic hole, the more difficult time-wise it is to crawl out".

But crawl out we do ...

NB: And if it costs Donald Dork his presidency, then so much the better! The guy lost the presidential popular-vote and no Real Democracy would have had him elected!

 

I read that the EU economy will contract by 7% this financial year. Combine the loss of money from the UK with the debt from countries such as Spain, Italy, Greece etc and you have a recipe for disaster.

The EU have yet to agree a bailout package and I predict that things will go sour very quickly. The French are going to love paying more in tax to cover other people's debt.

To quote Hamilton 'If New York is in debt, why should Virginia bear it?'

https://www.bbc.co.uk/news/world-europe-53107009

 

HOW DEEP CAN AN EU COUNTRY GO?

Wholesome exaggeration!

The EU will make do without trade from the UK that trades mostly with the US anyway. Besides that trade will become only more expensive for the UK. (Especially the French wines that they really like! Close to 350K Brits now live in France.)

Besides, I foresee that the Brits are going to do a Wakey-wakey five-to-ten years down the line and will want to return. (Cyprus is an island too, but it is smart enough to stay IN the EU.) The problem with the Brits is that they cannot recognize that they are no longer a major economic-power that once "ruled the seas".

The Brits, I think, will come to regret their coming-out. It is a stoopid move economically. As the world moves from the Industrial to the Information Age, more and more of low-tech goods will be built in the south of Europe (or even North Africa).

National Debt has been with us since the Dawn of Nationhood. A country must know how to manage it. Britain didn't.

The French are paying their own National Debt. There will be a higher portion of National Debt due to the Covid-19 lockdown loss of revenues and its economic-cost - but no differently than any nation that suffered the same fate. Which is why the economic forecast is poor for the remainder of this year - but gets better next year.

And that premise is not just "wishful thinking". There is no reason why EU-economies should not recover at least to their GDP-levels pre-Covid. And perhaps do even better.

Last time I looked, each EU-country bears its own debt and only partially is it shared wholly by the EU. Moreover, if the debt becomes exaggerated, the EU Commission moves in and orders a correction. That's one of the rules that the country signed to get into the EU.

It's goodness that the EU has found a woman to run it. Men are all too forgiving of their fellow male country-leaders when a fit-hits-the-shan economically, which is how male leaders get into deep national debt.

(Watch "mummy" back in Brussels crack-the-whip when that begins to happen in any EU-country. The EU game-rules have changed and the "boys" had better take note ... ;^)

 

Of course, money ... that is profit ... at the end of all discussions in the economy, is always the decisive factor for decisions and that will never change.
VW or many other manufacturers and no matter which sort of branch will not close their plants in China or anywhere else in the world because of this ... if only because they also produce for the local market there ... but the point of "delivery security" has a lot with many corporations and companies significantly higher priority than before Corona. And not only at the large corporation where I work, local for local has become significantly more important, also with others ... and I mean that

Look ... depending on the source and type, 2/3 to 80% of all electrical and electronic components come from China ... there are even more with magnets. Corona had the supply chains collapsed here, which in turn caused a standstill in Europe, because without these components from china (and without a corresponding inventory and safety stock thanks to "just in time") you cannot build anything and deliver it to your customers. It also costs money ... a lot of money ... and that's why local for local, a "second source" procedure and higher safety stocks ... let's say ... become more attractive

 

VW's plants in China are for sales in China. Damn few of those cars will make it into Europe.

Playing this silly game with Huawei has shown Europe how much of blunder that was. And Huawei is now being shut out of most of the 5G destined for the EU. (5G is considered with special consideration because of so-called national-defense reasons. Which is why Europe - supposedly - did not want Huawei providing and installing the technology.)

Talking tough (and being tough) is the ONLY language the Chinese understand. America has been a pushover for them - and the hard-talk now coming from Donald Dork is far too late in the game. Chinese production is now well implanted in the US and run by the Chinese, many of whom have become Americans. So, they aren't "going home" ...

Small component manufacturing, yes. The big-stuff (like cars), uh, no way!

The above statement can happen if one is fixated upon China. But, many European companies are opening factories in North Africa (all French speaking). There is no problem producing small-parts manufacturing in these countries.

The cost of production is somewhat more expensive than in China - but when shipping is considered the cost differential that still disfavors North Africa remains "acceptable". The hardest part is maintaining QC - and training that notion in North Africa takes more time than is usually necessary. (I know that personally.)

All in all, I would not hesitate moving truly cost-significant manufacturing of secondary products to North Africa. France has even moved some of its small-car manufacturing there as well.

It's no big deal, and it's taken a while, but the local staff are just as good there as anywhere in the EU. Moreover far fewer are migrating from there to France (same language) because they can find decent jobs where their families are located ...

 

China is certainly not innocent and does bad things ... that's not new. But it is also a fact that China basically does nothing else, such as the USA. And if a fool like Trump levies punitive tariffs against China, but of course ignores things that would be an own goal ... for example the things from Apple or the production of Ivanka of their clothing label ... well ... then it is that's hypocritical when it comes to the fight.
And of course China is also a very interesting market for many manufacturers ...

As I told ... China is still the largest manifacture of electric and electronical components and also of all magnets too. And t does not matter abou fixed on China and so on ... because even European manufacture produce in China mostly currently. And let some of these pastrs necessary for whatever car frm what ever car producer or whatever other machine having a braek in supply chain of such parts and they have fun. So locla for local is interesting.

 

Sorry boyz-'n-girls but you have made several references to "having a vaccine" to handle Covid.

Let's remember that Covid is NOT the first deadly epidemic to have happened. The first one was the 2002/4 SARS epidemic in China. Despite funding efforts of the WHO, an effective antidote was never found. The WHO stopped funding all development efforts in 2012.

And now, wow!, we are going to have shortly a killer-medicine for Covid-19?

I'll believe that when I SEE IT ... !

 

Basically, I am as skeptical as you and only believe in a working vaccine if it is actually there and used successfully.

Small note though.
SARS 2002/2003 officially had almost 800 deaths worldwide ... plus the number of unreported cases, which is normal, but is now not a multiple of the official number.
Since 2004 SARS has been ranked as successfully combated with only insignificant and really rare, individual new infections. So there was no real pressure because of a vaccine ...
The tricky thing is that COVID-19 and SARS are the same pathogen strain and that COVID-19 is most probably a mutation of the 2003/2004 case as it often happens with a virus ... COVID-19 is also known as SARS - 2 ... SARS stands for " Severe Acute Respiratory Syndrome ".

The name Corona is actually more correct than SARS, because both - SARS 1 and the current SARS 2 - belong to the Corona virus strain, which has been known per se since the early 1960s.

 

France's GDP to debt is 98%, Britain's is 86%. You live in France, right? Surely you are aware of the unrest caused by tax hikes? Just you wait until they have to bear the debt of Southern Europe. Collectivised debt is coming, it's the only way to save the crumbling Euro, and it will not go down well, obviously the countries with the highest debt are for it but the NET contributors are dead against it.

We will not be re-joining the EU. Please see recent election.