European economic outlook: stability & confidence remain in short supply

CGTN Europe

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

Transcript

00:00And has the EU hit the bottom of this curve, or is this the new normal?

00:04I think there is a lot of hope at the moment in European capitals on the forthcoming decrease

00:11in interest rates.

00:12Because of the energy crisis, the fact that electricity prices were so high, there's been

00:16a lot of inflation, meaning that it has become the role of the central bank to put high interest

00:21rates, making it very hard for government to spend.

00:24And if you see the growth in the US, it's been massively a growth of government spending.

00:29If you see the growth in China at the moment, it's also trying to send consumption back.

00:32So Europe has been waiting for this moment, and this might be now the moment not to waste

00:37the possible investment and to focus energy and use lower interest rates to restart the

00:43machine.

00:44So what are the quick fixes then?

00:48Number one quick fix is that energy prices have been very, very, very high, calling for

00:53a coordination of what Europe does with the energy transition.

00:58So we cannot just simply hope to compete against the US in gas prices and oil prices.

01:04And so Europe has been having this very ambitious agenda of green investment, etc.

01:09But local politics have made it very difficult to coordinate.

01:13So there's been a lot of wasted investment in fossil fuel, like old car industry, with

01:17a lot of money supporting industry that are not almost obsolete.

01:22And so there is a moment of reckoning and of doing things together in Europe and focusing

01:26investment on what actually can benefit Europe.

01:29Europe is still a strong exporter, a strong country which exports more than it imports,

01:33but it needs to wake up and to do things in a coordinated way.

01:37How important is political stability in all of this economic discussion?

01:42It's not easy to achieve any time soon, is it?

01:45Because we've got elections on the horizon and the obvious uncertainty around those outcomes.

01:52Absolutely.

01:53And I guess it makes sense that in difficult economic circumstances you have a lot of political

01:59instability and also populist movement coming in.

02:02But at the moment it feels a bit like a lot of concerts on the deck of the Titanic.

02:06Things are not going well and people start arguing about what is mostly details of discussions

02:11about the whole of security, Islam, etc.

02:13They're not going to fix it right now, but they want to talk about that because it's

02:17a topic that is somehow easier.

02:19So now there is a need for Europe to concentrate on massive demographic challenges, a transition

02:24for its industry, finding a way through in difficult energy prices, and there are a lot

02:29of distractions going on.

02:30So the hope is that those movements over time, they become a bit like Melania has become

02:35in Italy, which is to sort of take at the same time the kind of thing that make them

02:40popular but also focus their energy on the European level, which is of course something

02:45we wait to see what happens in Germany mostly.

02:48This is in short supply, isn't it?

02:50One of the frustrations about central governments presumably all around the world is you pull

02:55levers and nothing happens.

02:58How do you fix confidence?

03:01I think you fix confidence by showing some results.

03:04By showing some results and by showing that you actually can achieve something with the

03:09huge amount of public spending we are asking for.

03:12One of the big problems that Europe had in the last years is that a lot of subsidies

03:17have gone through a subsidy race against the US.

03:20So we've been giving billions of money to companies simply in the hope that they don't

03:23go away.

03:24But that doesn't show any kind of result.

03:26So maybe the current global uncertainty is something that can give hope to Europe in

03:31the sense that everyone is fighting on trade and putting trade barriers.

03:35Europe has a chance to say, look, we are now open for business and we're going to show

03:39our citizens that we can get something from that.

03:42To get something from trading with everyone and not joining the current atmosphere of

03:47closing borders.

03:48Renaud, good to talk to you.

03:49Thanks very much for coming on the program.

03:51Renaud Foucault from Lancaster University Management School.

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