Tuesday, March 20, 2012

20/3/2012: There is nothing new about Europe's growth crisis

EU's latest catch phrase is 'growth'. The Commission is banging on about subsidies along with an old tune of EU2020 'plan' for subsidies, picking of winners and rewarding the whiners. The IMF is whinging about 'structural reforms' which is all about extracting some sort of a surplus from something other than domestic consumers demand and investment. National authorities are singing the diverse songs - calling for subsidies and more borrowing from the North in the Periphery, calling for less transfers to the Periphery in the North. Belgium, as ever stuck in-between, has all of the above to the detriment of national dis-unity, which by now is a second-stage show, given all the dis-unity in the European Union.

And the reality is - EU and especially the Euro area are falling out of the world's economic orbit, with speeds that are accelerating - from the modest declines of the 1980s to faster rates in the 1990s and to acceleration in 2000s followed by speedier 2010s.

Note, all data below is sourced from the IMFWEO database with my calculations based on the same.

Here's how the mighty have fallen:

And no, the above charts do not show us performing any better than the US or G7. They show us performing as badly as Italy and worse than Japan:

  • Between 1980 and 2010, Italy's share of world GDP fell 46.7%, Euro area's share declined 47.1%, Japan's dropped only 32.8%.
  • Between 2010 and 2016, based on IMF projections, Euro area's share of world GDP will decline 15.2%, US' share will drop 9.7%, Germany's 15.0%, France's 13.6%, Italy's 19%, Japan's 15.7%
  • In the Decade of the Euro, Euro area's share of world GDP declined 20.7%, while during the decade of the 1990s it fell 15.0% and in the decade of the 1980s it declined just 7.5%
No matter how you spin it - Euro area is going down in world rankings of growth areas and it is moving at the speed worse than the one attained by Japan. 

The last chart above clearly shows that the rate of Euro area's might decline has accelerated dramatically since 2001 and that this rate is invariant to the current crisis.

More subsidies, Brussels, please! More 5-year plans for 'Knowledge, Green, Social, Whatnotwellhaveit Economy', Commission, please! They all have been working so well so far.
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