Problems with the EU Economy

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Presentation transcript:

Problems with the EU Economy

How is the EU Doing on Growth, Unemployment, and Inflation? Remember that Growth and Unemployment are far more important than Inflation

2007 3% 2008 0.5% 2009 -4.2% 2010 1.8%

Average or Natural Growth is about 2.2% for the EU Growth continues to be slow for the EU. This makes it difficult to reduce unemployment in Europe.

To reduce unemployment rate by 1%, the EU needs to grow at a steady 3 To reduce unemployment rate by 1%, the EU needs to grow at a steady 3.7% for one year. 1% reduction in the EU unemployment rate is 2.2 million good stable jobs.

Interesting Question: Which Country Leads Which in Growth Interesting Question: Which Country Leads Which in Growth? Does the US lead the EU or does the EU lead the US?

The Cross-Correlogram below indicates that the US probably leads the EU. This means that the EU might need the US to recover substantially before it can recover. Just a thought.

How is the EU doing with respect to unemployment?

EURO Area 2008 7.7% 2009 9.4% 2010 10% EU 27 2008 7.0% 2009 8.9% 2010 9.6%

What is the Recent EU Record on Inflation? 2008 3.7% 2009 1.0% 2010 2.1%

Stable inflation is very important since the main costs of inflation occur when the rate of inflation becomes variable and highly unpredictable.

Inflation in the EU has been very stable at or below 2% Inflation in the EU has been very stable at or below 2%. There does not seem to be any danger of deflation in the EU right now.