The European Economic Slump: Between Global Reasons and Country-Specific Causes

The European economy (in the sense of EU-27 and Euro-20) is currently experiencing a period of economic difficulties that are reflected in lower growth than that of the United States and Asian countries. It seems to be losing its relevance on the scale of the global economy. This is the immediate result of the sharp rise in energy prices induced by the sanctions taken against Russia, but also of structural factors in the EU (energy market) and the existence of the euro. To some extent, the process of economic integration pursued in the EU has contributed to spread and diffuse the energy crisis among EU members. This is in part explaining the current situation that worsen the new US policy about trade and tariffs. However, these general problems are added to crisis factors that are specific to each of the member countries, as shown by the study of the three main economies of the EU, France, Germany and Italy. These three economies are still weighting more than 50% of the EU GDP. They are facing specific crisis factors going from a strong deindustrialization, a loss in labor productivity and a strongly degraded fiscal situation for France to the combination of a weak internal demand and a long-standing crisis in Italy and to a crisis of the very model of the German economy caught between the energy crisis that hit harder a more industrialized base and a general dereliction of public infrastructures. But for Germany, the common currency – the euro – seems to have played a much negative role, particularly for France and Italy. The combination of these specific problems and general problems is proving difficult to resolve, the more so when the EU is facing President Trump’s new trade policy. One can wonder if the economic and monetary integration has not been pushed too far without a balancing global fiscal integration.