Europe's 'Stagflation' Could Jeopardise More Integration

Sunday Business (London, England), June 17, 2001 | Go to article overview

Europe's 'Stagflation' Could Jeopardise More Integration


W

HEN an economy slows down, things start to unravel, as Europe is now finding. Six months ago, the air was thick with assurances that the continent would not be much affected by the economic downturn in the United States. Au contraire: the impact has been marked, business confidence in Europe continues to deteriorate and even Otmar Issing, chief economist of the European Central Bank, now warns of stagflation.

There is a growing credibility gap over future statements by EU finance ministers that this week's "shock" 3% plus inflation number will do nothing to alleviate. This all makes markets and commentators wary of any talk of early improvement. Indeed, independent forecasts suggest worse is in store.

This weekend ABN Amro, in an analysis starkly headed Stagflation, has revised its euro zone economic forecasts for this year and next. Growth is lower and inflation is higher for both years, so that for this year, the growth forecast comes down from 2.6% to 2.1% (with Germany slowing to 1.4%). The forecast for inflation increases from 2.1% to 2.8%, with a prediction that the headline number due this week for May will show inflation up at 3.5%.

ABN economist Robert Lind says: "Despite policymakers' assertions to the contrary, the slowdown in the euro zone in 2001 will be sharper than we, or they, previously thought. At the same time, inflation will be higher than expected. Consistently, economic forecasters have underestimated the scale of the inflation pick-up over the past year."

As the growth story unravels, it is not just the credibility of EU finance ministers and officials that suffers. A Europe that does not have a compelling economic story is one that lacks a compelling integration story, too.

The idea of Europe is never more potent and persuasive when economic performance looks like a cure that everyone wants. Without the allure of growth, dynamism, higher investment and net capital inflow, then the "cure" soon becomes the disease nobody wants to catch.

How much more easy Tony Blair's task would be of persuading a sceptical British electorate of the merits of membership of the single currency were the euro zone enjoying surging capital inflow, resilient growth and an employment and productivity performance to die for. But why, if there is no evident growth benefit, should the UK back more integration?

Put another way, Ireland's 'No' vote in the referendum on the Nice Treaty may be indicative of a new attitude gaining ground across greater Europe. This viewpoint does not much differentiate between the Jospin and Schroder approaches of a more integrated Europe. However, it is not scepticism of the British type, more a signal from normally pro-EU voters to the European Commission and the Council of Ministers: don't assume we'll just go along.

Ireland's 'No' to Nice has brought forth a variety of explanations, ranging from insufficient understanding by voters of the purposes and importance of the treaty, to sheer bloody-mindedness by an electorate that has enjoyed large dollops of EU subsidy and does not want enlargement to spoil it. There is probably some element of truth in both of these. But what rankled with the Irish, and figured in the referendum campaign, was the official reprimand issued by the commission in February for Ireland's low tax policy, in spite of their low debt and budget surpluses.

For many, this offended ,not only because it was poor economics - a stricture against growth - but also because it infringed Ireland's right to set its own levels of tax. All official assurances throughout Europe insist there is no agenda of tax harmonisation. But if that is really the case, why was Ireland admonished for its fiscal policy? …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Europe's 'Stagflation' Could Jeopardise More Integration
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.