Special Report: Outlook for Europe - Focusing on the long term
It is astonishing how much economic and financial discussion focuses on the short-term and essentially trivial.
Investment provides the most obvious examples. Think about how even mainstream television news routinely reports on the fluctuations of stock market indices. It is questionable whether fund managers should monitor these on a daily basis, let alone the general public. For anyone concerned with 10, 20 or 30-year performance, it seems odd to focus on daily price movements. Such information should really be the remit of traders.
Not that economics is immune to such bad habits. On the contrary, consider the obsessive focus on possible changes in official interest rates. Think about the enormous amount of time and effort devoted to when the Federal Reserve would start raising interest rates. Of course, it did eventually start to raise rates but it is questionable whether the endless speculation beforehand added anything to human knowledge.
On the contrary, not only is it a waste of time but it detracts from what is truly important. Take economic prosperity, for example. It is widely agreed that productivity is the key determinant. Yet it is rare to see it discussed outside of nerdy economic circles.
This special report will attempt to shift that balance. It takes the opportunity of a period of relative calm in Europe to focus on longer-term trends. It starts with a consideration by me of the continental Europe’s economic trajectory since the 1970s. A longer-term focus on productivity reveals the abysmal record. It should alert those concerned with mass affluence that much needs to be done to reenergise the process.
Not that the euro-zone is uniquely bad in that respect. The UK’s record is also poor while the US, despite all the hype about the new economy, is suffering from a similar downward trend.
Fortunately, the descending spiral is reversible. It demands, first of all, the political will to kick-start a new round of economic growth.
Another important subject considered here is integration within the European Union. There is a lot of talk about this topic but few attempt to gauge just how far it has gone in key areas such as banking union and fiscal policy. My colleague Carlo Svaluto Moreolo draws up a scorecard.
Then there is the question of Greece. Not long ago it was widely feared that a Greek exit from the euro-zone, a Grexit, could prompt a break up of the monetary bloc. Today the Greek people are still suffering under severe austerity but the possibility of turmoil spreading to the euro-zone seems to have receded. Ayşe Ferliel Barounos reports from Athens.
Other topics covered include the state of the euro-zone’s banks – once also viewed as posing a systemic threat to the region – and whether there is a distinct school of German economic thinking.
Finally, there is the question of Brexit. This report kicks off with a selection of views on the topic from key figures in the investment industry.
The topic is a focus of the news not only in the UK but in continental Europe too. There is an understandable interest in the likely result across the region.
This is not the place to rehearse the many arguments on the subject but one point should be uncontentious. If the UK does vote to leave the EU it will be a decision of historic importance. Its reverberations are likely to be felt across the continent.
Daniel Ben-Ami, IPE deputy editor