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An Analysis of EU Growth Trends, with a Particular Focus on Germany, France, Italy and the UK

Published online by Cambridge University Press:  26 March 2020

Kieran McMorrow  and
Werner Roger
Kieran McMorrow*
Affiliation:
European Commission, DG ECFIN
Werner Roger
Affiliation:
European Commission, DG ECFIN
*
e-mail: [email protected] or [email protected]
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Abstract

Since the mid-1990s the growth performance of the Euro Area as a whole, despite some good individual country performances, has failed to keep pace with developments elsewhere in the EU (including the UK) and also in the US. This is especially the case for a number of the larger Euro Area economies. Despite an encouraging performance in terms of its labour input trends, there has been a significant, offsetting, deterioration in the Euro Area's underlying productivity performance. This is driven in large part, worryingly, by a marked downward shift in the growth rate of total factor productivity. Looking to the future, no significant recovery is predicted in the Euro Area's underlying economic performance over the period 2007–11. While the policy challenge is a serious one, the Euro Area as a whole can take comfort from the fact that the gains from a successful refocusing of its overall reform agenda could be considerable. For example, the progressive introduction of the five key measures linked to the Lisbon strategy (i.e. the services directive; reduction of the administrative burden; improving human capital; 3 per cent R&D target; and increases in the employment rate) could boost the Euro Area's economic and employment growth rates by more than ½ a percentage point annually for more than a decade. Such an outturn would give the Euro Area a potential growth rate of around 2½ per cent, a rate of growth which in per capita terms would be broadly comparable to that of the US over the 2007–15 time period and, on the basis of current trends and policies, slightly better than that of the UK.

Keywords

GDP growthProductivityEmploymentStructural reformD24J11J21O47
Type
Articles
Information
National Institute Economic Review , Volume 199 , 01 January 2007 , pp. 82 - 98
Copyright
Copyright © 2007 National Institute of Economic and Social Research

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Footnotes

The authors would like to thank Cécile Denis and Karel Havik for valuable suggestions regarding earlier drafts of this paper. The views expressed in this paper are those of the authors and do not necessarily reflect those of the European Commission.

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