Ratings agency Moody’s has upgraded the eurozone’s GDP forecast, noting significant improvement in several individual member states, and has downgraded US GDP growth.
The growth is being driven by consumer confidence, and strong export performance, even compared to China says the Director of the Center for European Policy Studies.
“The Eurozone has been on a good path already for a year. We have now to acknowledge that austerity measures have, in a first phase, a negative impact on growth, but afterwards they pay a dividend, sometimes even a ‘double digit’ one. It’s typical for the Eurozone to experience a bit stronger growth than expected. The problem is now that we have topped expectations. And that’s why, from now on, we really have to be careful,” said Daniel Gros.
Germany, as may be expected, is performing strongly, but France has shaken off its sluggishness and Italy, after years of flatlining, is seeing growth pick up, too.
Whatever the result of the German elections in September this forecast is unlikely to change in the short term, says Gros. Any political change would likely take five years to work through the system.
“The winning formula is always first to re-establish good public finances, than to adopt some reforms on the labor market, and then to wait, because the results are not going to be seen immediately. This is the solution that Germany adopted some years ago. France is now about to take the same direction. In Italy, on the contrary, the public debate is still open. We don’t know what Italy will do,” adds Gros.