Is the Eurozone Out of the Woods Yet? Examining the Challenges Ahead

CGTN Europe

CGTN Europe speaks to Renaud Foucart, Senior Lecturer in Economics at Lancaster University Management School.

Transcript

00:00Let's talk now to Renaud Foucault, who's a senior economics lecturer at Lancaster University.

00:04Good to see you again, Renaud. Welcome back to the program.

00:07So as we were hearing there, the inflation rate in the euro area

00:11arised last month and above the target.

00:14Christine Lagarde from the ECB saying that the darkest days of high inflation are behind them.

00:20But do you think she's spoken too soon and perhaps cut rates too soon?

00:25I think the news of today is pretty good news.

00:28And you need to look back at where we come from,

00:31is that it is something that would have been unbelievable 30 years ago,

00:34that after the episode of super high inflation we had, we could go back so quickly on track

00:40and very close to this arbitrary but very important threshold of 2% inflation.

00:45So I think it comes at very small details, but I think the current trajectory

00:51of the European economy should allow her to cut rates further.

00:55And I think this is something that is deeply needed for the European economy.

00:59It's quite a mixed picture, though, isn't it, when it comes to European economies,

01:02some of the larger ones, Germany, France, doing much less well than others.

01:08Yes, but it's also the beauty of having a large single market,

01:12is that this is how you see the benefits of the enlargement,

01:15that at the same time, where the big motor, the traditional engines of Europe,

01:20you think France, Germany are really struggling.

01:23You have some perhaps surprisingly good news coming from countries like Spain,

01:27and also this very regular, continuous growth of countries from Eastern Europe,

01:32which means that somehow the shocks, it's easier to balance them

01:35when you have this very, very large market.

01:37So sure, everyone is a bit dependent on Germany,

01:40and Germany not doing well is bad news for everyone,

01:44but Europe somehow has some form of resilience due to the size of its market

01:48and the fact that you have perhaps not a fully complete single market,

01:51but still free movement of people, capital and good,

01:54that means it's easier to absorb the shocks.

01:57So you sound pretty positive about the state of the Eurozone economy,

02:01but what are the headwinds facing it?

02:03We talked on the programme just now about consumer confidence,

02:05potential tariffs coming up.

02:07What are the problems that it could be facing?

02:10Well, I'm very optimistic about the possibility to cut rates.

02:13I'm not that necessarily extremely optimistic

02:16about the general state of the European economy.

02:19You still have those deep problems of ageing industrial capacity.

02:24We are still lagging on innovation,

02:26and there is a lot of thinking at the moment

02:29on how to continue to have this leadership role for Europe in competition policy,

02:34while at the same time trying to catch up somehow on innovation

02:38with countries like the US, but also with Asia.

02:41And of course, there is the very general problem of an ageing population,

02:44where Europe starts to realise that we have a very,

02:47very big problem of ageing population,

02:49and that tough choice will have to be made for countries

02:52which have generous pension systems.

02:54So not everything is positive for Europe,

02:56but I think at least there is a relatively clear trajectory,

03:00which is that Europe needs to think very hard about ways

03:02to complete the single market and to incentivise innovation much more.

03:07Renaud, good to talk to you as always.

03:08Thank you for joining us.

03:09That's Renaud Foucault from Lancaster University.

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