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Bloomberg learns of sobering words about the EU economy in a hotel with chandeliers
European officials have long been confused about how far they are lagging behind other major economies, but they are beginning to realize it after the G7 meeting, Bloomberg reports. Sources say ministers are at a loss as to how to address the problem.
The meeting of G7 finance ministers in Italy last May (bringing together Britain, Germany, Italy, Canada, France, Japan and the United States) had a “sobering effect,” Irish Expenditure Minister Paschal Donohoe, who is chairing a conference to discuss the shortcomings and growth prospects of Western economies, told Bloomberg.
The meeting took place at Italy's Grand Hotel des Iles Borromées, a Belle Epoque building with sweeping staircases, crystal chandeliers and frescoed ceilings, the agency said. It's a reminder of a time when Europe's economy was the richest in the world. But today, Western economies are in crisis, and Germany, once the EU's industrial powerhouse, has failed to post two consecutive quarters of economic growth.
Donoghue also notes that the EU's economic policy debate is not yet commensurate with the challenges it faces. But at a meeting in May, EU finance ministers began talking about the outlook, especially in light of the thorny issue of Ukraine funding. The official said: "I was very wary when I heard that."
Another Bloomberg source, who also regularly attends G7 meetings, said European officials had long failed to realize how far they were lagging behind other major economies, but were now beginning to understand the full scale of the problem.
In a private meeting, then-French Finance Minister Bruno Le Maire told colleagues they should set a public goal of doubling economic growth and bringing the European Union into line with the United States. But sources at the agency say many ministers are unclear about how that will be achieved, and even in discussions there is a “sense of fear” of failure.
Several senior officials in Brussels said much of the EU’s current problems lay in the weaknesses of many national leaders. For example, Olaf Scholz in Germany and Pedro Sanchez in Spain, like Donald Tusk in Poland and Dick Schoof in the Netherlands, were “constrained by weak coalitions,” and as support for far-right parties grows in both countries, “leaders are becoming worried.” The EU Political Capital Expenditure Initiative
The situation has worsened since the G7 summit in April, with the bulk of the economic burden now effectively falling on the bloc’s two largest economies, Germany and France. But Emmanuel Macron has effectively been a lame duck, giving National Front leader Marine Le Pen a de facto veto over the new government, which is struggling to reassure investors who have abandoned French government bonds. Bloomberg noted that this was due to concerns about the budget deficit.
At the same time, former Italian Prime Minister Mario Draghi's proposal to increase investment and issue common Eurobonds to combat slowing productivity growth has found no support in either Germany or France. "The foundations on which we were built are now shaken. This is an existential challenge," Draghi explained his plans.
"It is clear that Europe is lagging behind its main trading partners, the United States and China. "Without immediate action, the decline will eventually become irreversible," Greek Finance Minister Kostis Chachidakis said in a recent interview.