Most Eurozone members’ fiscal positions have undergone considerable improvement in recent years.
Cyclically, the eurozone is doing well, both by its own standards and relative to others.
What is the current global economic scenario?
From 2010-2016, global output rose at an average annual rate of 3.4%, according to the International Monetary Fund.
That may be lower than the 2000-2010 average, but it is higher than the growth rate in the 1980s and 1990s—decades that are not typically viewed as economically disappointing.
Despite significant political trauma, the US and the UK have performed as expected.
China, India, and Japan have also grown close to their potential.
In a rare occurrence, no major economy has dramatically outperformed its potential.
Three economies have, however, genuinely disappointed: Brazil, Russia, and the Eurozone.
What is the position of Eurozone?
In the first quarter of this year, the eurozone grew more strongly than the US or the UK.
Most of the eurozone’s larger countries have been showing stronger relative growth for some time.
Nonetheless, the eurozone’s long-term structural outlook remains uninspiring.
The prospects for the two key drivers of long-term growth—the size and growth of the working-age population and productivity—look grim for the eurozone’s largest countries.
But the prospects lies in the migrant flow (refugees) many of them young continuing to pour into Europe from troubled parts of the Middle East and Africa.
But tapping the potential of refugees requires assimilating them to European societies and economies—a challenge that has many Europeans justifiably worried.
But if met it would certainly mitigate Europe’s mounting demographic challenge, especially in Germany and Italy.
Most eurozone members’ fiscal positions have undergone considerable, so much so that the eurozone-wide fiscal deficit is now less than 3% of GDP, much better than the US or the UK.
Moreover, soaring tax receipts in some parts of the eurozone—notably Germany—are feeding almost embarrassingly large fiscal surpluses.
If France’s new president, Emmanuel Macron obtains sufficient backing in the National Assembly in the June election, he could try reducing France’s structural government spending, while pursuing tax cuts and improved labour-market flexibility.
