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Sylvain Broyer, Chief Economist at S&P: "The challenge going forward will be to rebalance growth models"

2020-10-27T01:53:46.908Z


The expert from the rating agency for Europe, the Middle East and Africa predicts that the European Union will return to the economic level prior to the coronavirus health crisis in 2022


Sylain Broyer, S&P Chief Economist for Europe, Middle East and Africa mario-andreya

When fatalism takes over, listening to optimistic views — however moderate — is a little breath of fresh air.

The chief economist for Europe, the Middle East and Africa at the S&P rating agency, Sylvain Broyer (Lyon, 49 years old), is one of those voices: he is not very concerned about rising debt as long as interest rates remain low. minimums and central banks remain in activist mode.

That, coming from a rating agency, is important.

In conversation with EL PAÍS from his home in Frankfurt, Broyer foresees that the entire EU - including the hardest hit countries, such as Spain - will return to the pre-crisis level throughout 2022.

Question.

He wrote recently that the European recovery was being faster than was initially feared.

But that was before the sprouts.

Where are we now?

Answer.

We are entering what we could call "phase three" of recovery.

After the recession we had a very strong rebound, more than expected, in the third quarter.

The problem is that it was only with the reopening of the economy and now we are at a critical moment, a kind of transition period in which governments are going to progressively reduce aid programs.

Although lower, growth will continue in the coming quarters and will accelerate again in the middle of next year, with European disbursements.

Q.

That, in a scenario in which there are no more strict confinements like those of spring.

A.

Yes, in that case we would rather go to a recovery in W.

P.

The ERTE, in its different modalities by country, have contained the blow of the crisis on the labor markets.

Is it too early to talk about success?

A.

The best measure of success is that even the UK has copied this scheme from Germany (laughs).

In the German case, during the financial crisis of 2008 and 2009 [the

kurzabeit

] already avoided job losses in the medium term and the destruction of human capital.

But for these plans to be successful, the recession has to be short.

And the question is whether in some areas of the service sector, the hardest hit, demand will recover soon: transport, hotels, retail ... In these cases we can see a permanent unemployment rate since the last crisis due to structural changes in the economy. demand.

But yes, from a macroeconomic point of view it is better to subsidize the labor market than not to: it would have increased the probability of an economic depression and would have jeopardized the recovery.

That people keep jobs, even if it is working less than before, preserves human capital.

And, individually, their chances of finding work in other companies or sectors are also much greater than if they had been unemployed.

P.

And from the point of view of the public coffers?

A.

The cost of these short-term job retention programs is much less than having a large number of people unemployed over the long term.

P.

How do you see Spain?

R.

Recovery is slower.

We are not seeing a decoupling of industrial production with respect to Germany, and that is positive because most of what is produced is for export.

But construction is not recovering as fast as in Italy and France, and that is one of the most negative points in our short-term outlook.

Part of this has to do with the fact that the unemployment rate is higher [which weighs on demand] and that the restrictions have been greater.

Mobility in Barcelona, ​​for example, is still 40% lower than before the covid, while in London, Frankfurt, Paris or Milan the drop is only 5%.

Q.

The fact that the industrial countries have taken the blow better brings back the question of whether deindustrialization was a bad idea.

A.

In the case of Europe, what we have seen has been a natural specialization of their economies in the areas where they have a competitive advantage.

To put it bluntly: it is better to spend the summer on a Greek beach driving a German car than on a German beach driving a Greek car.

It is normal.

That said, it is true that at the end of the nineties in countries such as France or the United Kingdom the political decision was made to let the industry go to China and other emerging countries.

Now we are discovering the importance of having a well balanced economy between the different sectors in order to withstand

shocks

.

One of the great challenges in the coming years will be that: rebalancing growth models.

Q.

What can you expect from the European recovery fund?

R.

It is something that, without a doubt, changes the rules of the game.

The countries that benefit the most will be those that have suffered the most from the effects of COVID-19 and those with more fragile economies.

And that is a huge change of approach: for the first time the EU gives first the carrot [and not the stick] to fulfill the economic and political agenda.

It is very positive.

Q.

How much should debt worry us?

R.

We are going to come out of the crisis with a high debt, that's for sure.

But interest rates will remain low.

Debt solvency fears today have nothing to do with the 2008 and 2009 financial crisis. So the ECB took eight years longer than the Federal Reserve to embark on a QE [a large-scale debt purchase program] ;

now, on the other hand, the reaction has been rapid and forceful, containing pressure from the markets.

And as long as the debt remains on the central bank's balance sheet, its cost will remain close to zero.

Q.

When will the EU return to the pre-crisis level?

A.

In the baseline scenario, you will have to wait until 2022. Some countries, like Germany, will probably do it sooner.

And others, like Spain, maybe a few more months but in any case before 2023. That, without taking into account all the European funds.

Source: elparis

All business articles on 2020-10-27

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