Triple shock hitting southern Europe in an asymmetric fashion

In a recent post, Philippe d’Arvisenet suggested that econometric evidence pointed to an increasing convergence of the business cycle over EMU member states. The caveat, however, was that he found a continued divergence of trend growth rates. By contrast, Walter Molano, used quite drastic terms to describe the impending underperformance of EMU’s southern countries and […]

Tough wage negotiations ahead in Germany

A year ago we published our forecast on Eurozone Watch that after years of decline (see here), unit labour costs in Germany would start to be back on a rising trend after the wage bargaining round in 2007. This forecast has proofed to be almost dead on target. Our model indicated that unit labour costs […]

Beware the decoupling complacency

Current debate about the business cycle in Europe is exhibiting a relative complacency about the potential fallout from America’s current economic woes. The latest piece of evidence comes from Daniel Gros who has advocated that while the European economy might slow down as a result of a US recession but might actually escape negative sequential […]

Reform policy in need of a new focus

Over the last few years, the term “structural reform” has been used as a synonym for deregulating European labour markets. In this piece we are going to argue that this emphasis is intrinsically wrong at least as far as it is an illusion to hope for a boost to economic growth from this kind of […]

Rising number of childbirths in Germany: A glimmer of hope for consumption

Whether a significant pick-up in consumer spending in Germany is in store over the coming year, will be of essential importance for this country’s and Europe’s growth prospects in 2008. As Sebastian Dullien correctly outlined in his post on November 9, 2007  (, the coming twelve months will not see an environment that is conducive […]

Germany’s messy approach to minimum wages

Recent news in Germany has once again brought the ongoing discussion about the introduction of minimum wage to the newspaper headlines. After unions and the federal postal services agreed upon the introduction of a sector-wide agreement which is to be declared mandatory by early-2008, a private sector competitor announced 1,000 in staff layoffs and is […]

Forget about strong European growth performance in 2008

Among professional forecasters 2007 started on a very interesting note: Could EMU economies grow on uninterrupted from the slowdown in the USA? At least the standard indicators of economic confidence ranging from the EU Commission survey, the PMIs to ifo did suggest so. Furthermore, Germany did seem to have weathered the VAT shock surprisingly well. […]

Reforms or cycle? Some comments on the German debate

Luxemburg’s prime minister once opined on structural reforms: „We (Europe’s politicians) all know what has to be done, yet we also know that we are politically dead, if we do it“.     With respect to this, the discussion in this blog started by Michael Burda on the one hand and Sebastian Dullien and Ulrich Fritsche […]