This is a recent meeting between important American financiers and one of their contacts in Paris. “But then what is happening in Europe? Why are you not doing anything about your growth?” They have decided not to invest another cent in the Old Continent. They look on in disbelief at the apparent impotence of the public authorities in the face of economic stagnation in the Eurozone.
European growth has lagged behind that of the United States since the 2008 financial crisis, but the gap has widened further after the Covid-19 pandemic. Since the fourth quarter of 2019, US growth has been 9.4%, more than double the 4% in the euro area and 3.8% in France. The explanatory factors are numerous: the energy shock was stronger in Europe due to the geographical proximity of the war in Ukraine; the United States is a net exporter of hydrocarbons; budgetary spending is less significant in Europe, while the White House has granted huge credits to try to reindustrialise the country… But another reason, increasingly cited, is the action of the European Central Bank.
The euro zone is meeting this week and could announce, on Thursday 12 September, a reduction in its interest rates, from 3.75% to 3.5%. This would be the second cut, after a first drop from 4% to 3.75% in June. But isn’t this too little, too late, when European growth is slow and seems to have slowed even further in the third quarter?
Very different causes
“The ECB was unsuccessful, unlike the Federal Reserve [Réserve fédérale, la banque centrale américaine] »“This is the case,” says Mabrouk Chetouane, director of international market strategy at Natixis IM, an asset management company. He would like to see the monetary institution act much more forcefully: “We must act faster and more forcefully, announcing a tunnel of rate cuts.” Nicolas Goetzmann, head of economic research at the Financière de la Cité, a fund management company, argues the same. “The ECB was wrong: to reduce inflation it sought to curb domestic demand, when that was not the problem.”
To understand these attacks on the Frankfurt institution, we must go back to the end of the pandemic, at the end of 2021. The great return of inflation took all central banks by surprise, without exception. In both the United States and Europe, the causes seemed to be the same: disruption of logistics chains (shortages of microprocessors, raw materials, overwhelmed maritime transport, etc.) and rising gas prices when Vladimir Putin cut off supplies to Europe. In fact, the figures were similar: in the eurozone, peak inflation was 10.6% in October 2022; in the United States, it was 9.1% in July 2022. Since then, both curves have fallen and inflation has returned to 2.2% and 2.9% respectively.
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