Global Economy, Money & Finance, GDP, Government Finance
Regardless of how Greece resolves its payment crisis in the next few weeks, there is bound to be a knock-on effect on financial markets. This in turn will indirectly affect business conditions in the foreseeable future, primarily in the Eurozone but broadly on the entire continent.
Europe hits the news headlines with increasing frequency these days. In addition to the faltering economy, domestic politics supply ample doses of uncertainty, testy intra-EU relations, and mounting social tensions. For businesses exposed to the European political and economic cycles, five potential risks stand out for 2014: deflation, a gas war, a third recession, a breakdown in trade negotiations, and political gridlock.
Global Economy, Competitiveness, Government Policy
Between 2009 and 2014, international rankings for ease of doing business improved in only about a third of 29 European economies. This would justify the (cautious) concern about European business slipping in competitiveness. The pro-business climate has decayed more in some countries than in others but the deteriorating trend is consistent across multiple rankings.
The Eurozone faces a period of low prices, languishing real (inflation-adjusted) wages, suppressed consumption, and barely growing fixed investment in the years to come. Forecasts put Eurozone GDP growth at about 1 percent in 2014, and manufacturing output is set to expand close to 2 percent. The region suffers from an overreliance on external demand for generating income. The private sector is income-constrained and will struggle to provide a boost. Banks are shoring up balance sheets following failures of some large and small institutions. As a result, the current efforts led by the European Central Bank to improve capital adequacy are crowding out private sector lending. The Eurozone is stuck with an export growth strategy that combined with weak domestic demand means GDP projections probably overstate both the length and strength of recovery.
The Comprehensive Economic and Trade Agreement is the most extensive trade deal ever signed by Canada, and could be a template for the TTIP between the EU and the United States. The agreement will abolish most tariffs on merchandise trade between the largest consumer market in the world and tiny Canada, but it will also have far-reaching implications for investment, service trade, labor markets and regulations on both sides of the Atlantic.
Global Economy, Competitiveness, Foreign Trade, Imports & Exports
When completed, the Transatlantic Trade and Investment Partnership will lift trade between the U.S. and the EU beyond an already elevated level. Could this heightened trade and investment intensity offer a natural hedge to cyclical variation for American (and European) multinationals? In other words, when business sours in the U.S., can American industrial multinationals look to Europe for more receptive markets for exports and/or production? One way to search for a hedge is through countercyclical business conditions on both sides of the Atlantic. Possibilities can be filtered into two broad categories.