RaboResearch - Economic Research

May 3, 2016

We expect that economic growth in Europe will remain subdued in the coming years, with most Baltic and CEE countries likely outperforming the others and most Southern and South-Eastern countries expectedly underperforming. Structural growth challenges are significant and unlikely to be adequately dealt with any time soon. Division among member states, increasing populism and complacency withhold the EU and individual member states from necessary reforms to raise the longer term growth potential of European countries and improve the block’s resilience to shocks. Due to abundant liquidity in the system, the lack of strong growth and reforms currently barely leads to financial market stress and higher government bond yields. As such, the current expansive monetary policy in Europe lowers incentives for difficult, yet necessary, firm policy action. So on top of delivering only moderately positive results for the economy in the short term, current monetary policy for sure does not solve structural challenges. In fact, it also brings along counterproductive side effects and carries risks. 

Regional study Europe: Monetary challenges
The results of unprecedented monetary easing measures in the past several years have been relatively disappointing so far. Furthermore, this policy also carries risks, such as excessive valuations in financial instruments and a deterioration in the functioning of markets.

Political developments in Europe: Multiple challenges put EU’s future to the test
Rising support for populist parties and the challenges imposed by the migration crisis weigh on EU cohesion, political stability and the implementation of structural reforms. A UK exit from the block could have far-reaching consequences. 

European F&A needs to reposition itself in the global arena
The European food and agricultural value chain is relatively diverse and stable. As a result, the European F&A value chain is principally low risk. But, the risk profile is set to worsen due to external developments and internal challenges.

Macro-economic developments Europe: is Europe becoming the new Japan?
European growth is expected to remain subdued in the coming years, due to fading tailwind gains and structural weakness. Negative risk to the outlook have risen; the refugee crisis and a Brexit being the most prominent ones.

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Related studies

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Time for the big reset of monetary and fiscal policy - February 10, 2016

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Why growth keeps disappointing - September 10, 2015

Institutional quality in Europe: diverging trends in challenging economic times - May 07, 2015

Population ageing in Europe: risks for growth and fiscal position - May 07, 2015

Europe’s (public) debt challenge - May 07, 2015

Country reports

Belgium: recovery at a snail's pace - April 18, 2016

France: Growth returns but remains structurally weak - May 2, 2016

Germany: stable economic growth with challenges ahead - April 11, 2016

Hungary: Stable growth, but government policies remain unorthodox - May 2, 2016

Ireland: The Celtic Tiger is back - April 15, 2016

Italy: Banking sector weakness hampers economic recovery - April 29, 2016

Country Report Luxembourg - May 21, 2015

The Netherlands: broad-based economic recovery surrounded by international uncertainties - April 22, 2016

Country Report Poland - May 8, 2015

Portugal: weak reform momentum threatens feeble growth - May 10, 2016

Spain: Strong economic growth masks risks related to political instability - April 29, 2016

Switzerland: quick economic rebound after massive appreciation 2015 - April 19, 2016

Turkey: ongoing political instability - April 25, 2016

United Kingdom: Brexit poses the main risk to the economy - April 26, 2016