Tuesday, May 20, 2008

EU-15 Economy Grows 3%, Highest Since 2006

FRANKFURT--The euro zone grew 0.76% during the first quarter of this year, the statistics agency Eurostat reported. The region's numbers, which represent quarter-on-quarter growth, also got a surprising lift from France, where the economy grew 0.64% in the first quarter, and from the German economy, which grew 1.53% in the first quarter of this year.

The figures, which were about double what most economists expected, suggested that the European economy was demonstrating a resilience that seemed unlikely as recently as last autumn.

Note: The 0.76% quarter-to-quarter growth (3.04% annualized) for the EU-15 is the strongest economic growth there since the fourth quarter of 2006, and is significantly above the EU-15's average growth of 0.50%.


At 5/21/2008 2:36 PM, Blogger the buggy professor said...


As with your earlier post on the German economy and its vigor, this too is good news about the EU-15's overall average growth . . . a result of the efforts of various governments, with uneven results across their countries, of introducing market-oriented reforms to make their product and labor markets more flexible.


And the growth comes, moreover, on top of an over-valued euro (in dollar terms).

That suggests --- only suggests, the data aren't out yet I believe --- that the EU-12 anyway in the euro-zone aren't dependent as they once were on export-led growth out of Germany to the rest of the world (and to an extent out of France and Italy).

My own hope is that if the EU --- after all, a very wealthy and large regional economy --- can come to rely more and more on domestic-generated economic growth, the euro will and can stay high in dollar terms and put more pressure on US economic policymakers to begin weaning themselves off the habits of relying on large current account deficits and corresponding capital inflows to balance our exchange with the rest of the world.


If so, what then?

Well, in that case, US businesses of all sort will become even more export-oriented, some of our GDP growth can depend on more and more exports, and in turn Asian and EU large firms might set up more business here, with capital investments of various sorts to follow.

It would ease the pressures on our labor force of constantly adjusting to the turbulent forces of both constant technological and globalizing changes and outright shocks. As it is, our work force has been in the avant-garde for the last 35 years or so of absorbing these radical changes and shocks. It's a tribute to just how flexbile and adaptable American workers are.


But, but . . . well, though our national economy has certainly benefited from the changes --- it's much more productive, efficient, and flexible --- the hardest hit have been lots of workers in the rust-belt regions who can't as easily retrain, pick-up and move as free-market enthusiasts postulate.

Many are too old and settled in their habits, or have trouble learning new things, or fear moving out of a community they know to another part of the country. So far, we've been lucky that there have not been more electoral and other backlashes.


It would also help if we were to cut down hard on illegal immigrants and slow down the influx of legal but badly educated immigrants. They have added a large supply of poorly educated workers that have kept wages down in sectors --- restaurants, gardening, hotel cleaning, and sweat-shop mfg --- that should in my view rise with little spillovers on the prices of average customers . . . certainly not in ways that even begin to emulate the bursting explosion in gas-prices.

No less important, the constant influx of poorly educated Hispanic workers is straining the social fabric of community life in lots of places . . . not least now in Santa Barbara. Vicious gang-killings and robberies have occurred here in the last two years, even though (fortunately) the native Hispanic community is largely stable and full of decent citizens.

Even so, the drop-out rate from high-school in the L.A. area is nearly 60% of Spanish-speaking kids, and the illegitimacy rate of new Hispanic babies is 50% nation-wide. Why these social trends aren't factored into the libertarian and other free-market analysts is a major reason why I personally --- despite preferring out far less statist capitalism than the EU (or Japanese) sorts --- find distressing.


Thanks again for all these terrific data-based posts of yours. Nothing else like it on the web that I know of.

-- Michael Gordon, AKA, the buggy professor: http://www.thebuggyprofessor.org


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