Aging Europe can’t increase labor productivity
Eurozone was expanding in recent years fueled by historically low interest rates, a surplus in the budget and historically low unemployment in major league of Union’s members. In short, we are afraid that this epoch is over.
The question is whether the next report will be so beautiful again. The German industry is doing worse than expected and in France it is also shows some difficulties. The protests of the Yellow Vests caused a major dip in growth, as mainstream media says. However it was quite the opposite: economic slowdown and high taxes is fueling protest movement. The two biggest economies of the eurozone are in trouble. And that has consequences for the rest of the EU.
There were disappointing figures from China reported. The country is struggling with US trade sanctions. They also affect European market because of the slowing export.
And there is still uncertainty about the Brexit and the shutdown, the closure of part of the American government spending, If that shutdown will stay for a long time, it can also damage the economy of the EU further. The fear of these potential dangers already has influenced budget planning and assets valuation. For years, exports were the main engine of growth for the economy. The stock exchanges have made a considerable dive and producer confidence is also declining. In France, it even went so far as to account for a contraction in production.
Structurally, the economy is not growing so fast, because labor productivity hardly grows anymore. That means that growth is only boosted by getting more people into work. But because of the aging population, fewer are available for work. Labor productivity, or what someone can produce in a certain period, must therefore be increased.