Video transcript: Patrick Artus - 2012 Economic assessment
Experts' views: Patrick Artus - 2012 Economic assessment (Vidéo)
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2012 Economic assessment
Patrick Artus Chief Economist - Natixis
2012 was marked by a number of major changes on an economic point of view. For one, the recovery of the U.S economy due to the recovery of the housing market: housing construction was up, prices were up, and interest rates were very low, all of which contributed to aggravating the crisis in Europe. Also, at the end of 2012, growth rates were extremely low, even negative in all the euro zone countries experiencing problems; those countries are caught in a downward spiral where less growth means it is more difficult to reduce public deficit, which means tighter budget policies, which means even less growth. Unemployment increased and, as a result, wages dropped. All this made for an unfavorable second quarter in 2012 in the euro zone. And then there was the unexpected emerging markets great slowdown. China, and India, Brazil, Turkey, Romania, Korea, all the major emerging countries, because of the domestic markets, such as in China, because of a growth model, such as in India where growth is driven by exports and low labor costs, a model which has reached its limits, and because also of the weak European growth. It was therefore a bad year with global growth way below what we were used to. In fact, the only zone that did well, except for a small number of emerging countries which still have a healthy economy, such as Indonesia or Mexico, well it’s the United States. Everyone showed signs of serious weaknesses and at the end of the year, global trade flat-lined; there was no growth at all, something that has rarely happened in the last twenty years..
What were the changes concerning institutions in 2012?
There was another important factor in 2012: that was the creation of new institutions, specifically in the euro zone, which went a lot faster than we feared or expected. I don’t know of many analysts or observers who expected that, in 2012, the European Central Bank would accept to purchase sovereign debt, potentially very large amounts, that European funds would be created to acquire the debt of countries experiencing difficulties and to recapitalize banks, that we would see the beginnings of a banking union, with European bank regulations, and bank crisis resolution solutions, and that we would launch a long-term project that would result in the creation of a political union, a budget union, a European budget and the joint issue of debt. Therefore, major progress was made, which resulted in the stabilization of financial markets. In July, the financial crisis in the euro zone started to wind down considerably, interest rates in Spain, Italy, Portugal, Ireland dropped significantly. The euro rose in value, so did equities, and bank debt increased significantly, in addition to the changes represented by the creation of new institutions, support mechanisms for countries experiencing difficulties, support to banking systems experiencing difficulties, often large amounts, which is something that the financial world did not expect to happen so quickly.
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