A decade after the global financial crisis and ensuing economic downturn, how has Europe changed? Well, not as much as you might expect, according to Matthew Edwards, writing for the Austrian Economics Center. Analyzing data from the OECD and Eurostat, Edwards finds surprisingly little difference from pre-crisis conditions… and unfortunately what has changed is mostly not for the better:
- In public finance, total government revenues increased somewhat in three quarters of European countries surveyed, while government spending increased in about half – but not necessarily in the same countries, meaning deficit spending is back, whatever talk of “austerity”.
- On that note, government debt rose in practically every EU country over the last decade. Only four countries – Germany, Hungary, Malta and the Netherlands – were able to lower their debt over this period. Italy, Greece and Portugal, some of the problem children of the Eurozone crises, all have gross government debt well over 100% of GDP.
- Competitiveness increased in half the EU, especially favoring Eastern European countries.
- One piece of relatively good news: R&D spending increased in two-thirds of countries surveyed.
- Edwards notes: “Questions can be asked as to how much the last ten years represent a ‘lost decade’, similar to that in Japan in the 1990s – clearly some countries are still far from fully recovered…”
- Additionally, the sustained rise in government debt in most countries prompts Edwards to wonder/warn: “what happens the next time there is a major recession or financial crisis?”
The AEC piece jibes pretty well with Bruegel’s piece addressing European growth trends, by Zsolt Darvas, Jan Mazza, and Catarina Midoes, which found that from 2003-2015 Eastern Europe countries including Bulgaria, Poland, Romania, Slovakia and the Baltic states were the fastest growing economies in Europe. Meanwhile – and no surprise – Greece and Italy fared worse.
- Bruegel’s analysis also explored regional trends in economic growth, revealing yawning disparities in economic growth within countries as well as across Europe, especially between metropolitan and rural areas. For example, France was almost uniformly stagnant when it came to economic growth – except, of course, Paris and a few tourist-friendly spots in the south of France.