Thank you, looked forward to this, a lot to think about.
Going back to easing policy, decoupeling from the Fed cuts makes sense. With high energy prices and decreasing outlooks for exports at least the lending market can be stabilized through artificially created inflation?
I think the fireing of the finance minister is a positive signal, as his agenda was anti-stimulus and maybe was one part of the puzzle which is holding back the EU from building up domestic consumption?
My bingo card, or hope, would be of energy prices coming down further, by an end of the ukrain war and/or lack of china or emerging markets energy demand? This would boost domestic consumption as, after the rising wages of recent years, income and savings get spent outside imported energy?
I would think that government work is, in general, less good for productivity than working for the private sector, only because these are lower-paid jobs, which therefore contribute less to GDP. And even if they are less productive for the subsequent economic sectors in the short term, they create social stability and quality-increases of the overall social infrastructure, which helps the economically advanced sectors in the long run?
To your points about the positives for Germany I agree, there are some things pointing in the right direction. Germany needs to change the way it sees itself in Europe and how it views the "morality" of its economic decisions. Govt spending might not be the solution but it's a necessary first step to balancing out Europe as a whole.
The public sector pay being lower isn't directly the problem, just that the low pay is describing jobs that have less economic value add. It's a social safety net, yes, but having more people rely on a safety net is usually a bad indicator.
Excellent analysis that exposes how superficial employment metrics mask deeper structural problems in the EU economy. Your focus on the productivity impact of expanding public sector employment is particularly insightful, but there's another critical dimension worth considering: the democratic implications.
The shift toward public sector employment represents not just an economic inefficiency, but a fundamental transformation in the relationship between citizens and the state. As more Europeans become directly dependent on government employment, national parliaments' ability to implement necessary reforms becomes increasingly constrained. This creates a self-reinforcing cycle where bureaucratic expansion further erodes both economic dynamism and democratic accountability.
Your comparison between German and Spanish economic trajectories illustrates this perfectly - it's not just about GDP numbers, but about the fundamental sustainability of the European economic model and its compatibility with meaningful national sovereignty.
On the point around the relationship between the citizen and state I agree. There is a sliding scale between unfettered capitalism and communism, and changes like this where the state becomes more responsible for the allocation of capital slides the entire economy a little away from the "capitalist" side and towards the "communist" side. Going too far either way is probably bad for society, and the decay in productivity growth is probably a warning.
Hi again, I am trying to replicate your chart. May I ask if you used seasonal and calendar adjusted data or not? And for the unit of measure, did you use "Current prices, million euro", or did you use some chain linked volume measure?
Thank you, looked forward to this, a lot to think about.
Going back to easing policy, decoupeling from the Fed cuts makes sense. With high energy prices and decreasing outlooks for exports at least the lending market can be stabilized through artificially created inflation?
I think the fireing of the finance minister is a positive signal, as his agenda was anti-stimulus and maybe was one part of the puzzle which is holding back the EU from building up domestic consumption?
My bingo card, or hope, would be of energy prices coming down further, by an end of the ukrain war and/or lack of china or emerging markets energy demand? This would boost domestic consumption as, after the rising wages of recent years, income and savings get spent outside imported energy?
I would think that government work is, in general, less good for productivity than working for the private sector, only because these are lower-paid jobs, which therefore contribute less to GDP. And even if they are less productive for the subsequent economic sectors in the short term, they create social stability and quality-increases of the overall social infrastructure, which helps the economically advanced sectors in the long run?
To your points about the positives for Germany I agree, there are some things pointing in the right direction. Germany needs to change the way it sees itself in Europe and how it views the "morality" of its economic decisions. Govt spending might not be the solution but it's a necessary first step to balancing out Europe as a whole.
The public sector pay being lower isn't directly the problem, just that the low pay is describing jobs that have less economic value add. It's a social safety net, yes, but having more people rely on a safety net is usually a bad indicator.
Excellent analysis that exposes how superficial employment metrics mask deeper structural problems in the EU economy. Your focus on the productivity impact of expanding public sector employment is particularly insightful, but there's another critical dimension worth considering: the democratic implications.
The shift toward public sector employment represents not just an economic inefficiency, but a fundamental transformation in the relationship between citizens and the state. As more Europeans become directly dependent on government employment, national parliaments' ability to implement necessary reforms becomes increasingly constrained. This creates a self-reinforcing cycle where bureaucratic expansion further erodes both economic dynamism and democratic accountability.
Your comparison between German and Spanish economic trajectories illustrates this perfectly - it's not just about GDP numbers, but about the fundamental sustainability of the European economic model and its compatibility with meaningful national sovereignty.
These are all great comments.
On the point around the relationship between the citizen and state I agree. There is a sliding scale between unfettered capitalism and communism, and changes like this where the state becomes more responsible for the allocation of capital slides the entire economy a little away from the "capitalist" side and towards the "communist" side. Going too far either way is probably bad for society, and the decay in productivity growth is probably a warning.
I see we have both been ploughing through 328 pages of Draghi! Great note.
I read yours last night, loved the stuff on Euro defence. Hopefully Europe learns that helping itself may be the only way out of it
Thanks Peter. I think it makes sense for them to try however hard the coordination issues may seem right now.
Hi thank you for another insightful article. May I ask how you created the stacked column charts? Did you use excel? They are neat.
Kind regards,
Yes, you can make them in Excel with the stacked columns chart type!
Hi again, I am trying to replicate your chart. May I ask if you used seasonal and calendar adjusted data or not? And for the unit of measure, did you use "Current prices, million euro", or did you use some chain linked volume measure?
Kind regards,
Thank you very much!