Nicolas Goetzmann is responsible for research and macroeconomic strategy at Financière de la Cité.
FIGAROVOX.
- What are the differences between the European and American recovery plans?
Nicolas GOETZMANN.
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The growth forecasts available to us today make it possible to measure the effects of these stimulus plans, whether in Europe, the United States, and even in France.
The European Central Bank considers that the euro area's GDP will return to its 2019 level during the second quarter of 2022, the Banque de France makes the same forecast for France.
Conversely, according to estimates made by Goldman Sachs bank, US GDP could return to its pre-crisis level as early as the second quarter of 2021, which shows a one-year lag in favor of the United States.
According to these same forecasts, growth in the euro zone between 2019 and 2022 will be 1.7%, 0.7% for France, and 8.4% for the United States.
It is therefore a gulf that separates the two continents for the coming months and years, and this result is mainly the result of the differences between the stimulus plans.
It is evident that the United States - lacking sufficient social safety nets - was made to spend more during the crisis to support its people.
Over the past 12 months, the United States has changed its monetary policy strategy and implemented a succession of fiscal stimulus packages totaling $ 5.5 trillion, or 26% of its GDP.
At the French level, our “crisis” budget support was 86 billion euros, or 3.5% of GDP, while the European recovery plan represents 750 billion, or a total of 6% of GDP to be spent over the course of the year. '' a period between 2021 and 2026, or around 1 point of GDP per year.
It is evident that the United States - lacking sufficient social safety nets - was made to spend more during the crisis to support its people.
But this "justification" is not enough to explain the European under-dimensioning, because the checks that were sent to the American population have made it possible to experiment with a new approach.
In the aftermath of the crises of 2000 and 2008, teams at the United States Federal Reserve looked at the effectiveness of fiscal measures in times of crisis and concluded that simply sending checks was very effective.
It is not a question here of a simple safety net like those we have in Europe, it is a question of submerging the level of income of the population so that this one consumes strongly, quickly, and that the economy America returns to its pre-crisis level as quickly as possible.
Over the last twelve months, the income of American households grew by nearly 6% (adjusting for inflation), the strongest increase observed since 1999, which was a year of strong growth.
How to explain such a difference?
The difference in approach is fundamental.
We are witnessing a real structural upheaval in the United States, the aim of which is to correct, not only the crisis linked to the epidemic, but also years - decades - of growth considered suboptimal.
The economic stake can be summed up in one sentence;
what was once considered a period of "economic overheating" must now be regarded as the normal state of the economy.
The objective of the American authorities is to put the economy in a situation of full capacity, and this, in a durable way.
Even if this word has no real meaning, it is about breaking away from what has been called “neoliberalism” for 40 years.
This upheaval has been in the making for several years, he has even been a bi-partisan in the political field.
The current monetary innovations were carried by men appointed by the republican administration;
Richard Clarida and Jerome Powell, who are now supported in their approach by the Biden administration.
Likewise, fiscal stimulus plans began in March 2020, on a Democratic proposal, but with the support of the Republican administration.
We sometimes have the impression that this “revolution” is the fruit of the last election, but it is in reality the result of an
economic
aggiornamento
which took place within the very American “technocracy”.
We are in the process of changing the economic era and it seems that the European capitals, in France and in Germany in particular, do not manage to realize it.
They are men at the heart of the system who are changing everything.
Paradoxically, it is therefore the ability of the technocracy to reinvent itself, to abandon its old totems, and to seize the liveliness of the academic debate existing in the United States since the Great Financial Crisis that is the engine of this transformation.
Politics only took up these questions at a later stage.
The challenge of this transformation is to put an end to the idea of an economic decline perceived as a Western inevitability.
Goldman Sachs Bank now forecasts an unemployment rate of 3.2% by 2023 for the United States, which would be the lowest level reached since 1953. We are in the process of changing the economic era and it seems that the European capitals , in France and Germany in particular, fail to realize this.
Whether on the monetary or budgetary issue, our national and European representatives are still attached to old economic totems, despite the poor results obtained in recent years.
Are Europe and America experiencing a crisis of the same magnitude?
The fall in 2020 GDP was only 3.5% in the United States, against -6.9% in the euro zone and -8.3% for France.
But this result was already the result of stimulus plans.
In June 2020, estimates of the fall in the US GDP exceeded 6%, but the intervention of the authorities made it possible to neutralize a substantial part of this loss.
For the year 2021 and the recovery, we must obviously take into account the impact of the American vaccination campaign, but it was thought through and built from March 2020, when the Europeans did not seem to believe it. , it is therefore not a question of luck but of a capacity for crisis management.
On both sides of the Atlantic, should we be worried about the debt?
Interest rates remain at historic lows, investors are still ready to accept a minimum - if not negative - remuneration for lending their savings to the States.
But the debt issue is poorly posed in the public debate.
The cause of our deficits is to be found in the too weak growth that we are experiencing;
we are compensating for this weak growth by resorting to deficits.
Then, the accumulation of these deficits produces an increase in the size of the debt.
The cause is therefore growth, but we are trying to fight against this phenomenon by reducing spending, which will lead to a further decline in growth which will lead to more deficits and debt.
This approach is a vicious cycle.
If the European Central Bank supported the euro zone economy with the same strength the United States does, our growth would be much stronger, and our deficit requirements would then be considerably reduced, and would allow a reduction in indebtedness.
The issue is therefore that of supporting growth, and here we come back to the issue of central banks.
If the European Central Bank supported the euro zone economy with the same strength the United States does, our growth would be much stronger, and our deficit requirements would then be considerably reduced, and would allow a reduction in indebtedness.
From a broader perspective, this strategic difference between the United States and Europe will result in the United States resisting China's desire to exceed American GDP by 2030. By relying on a new economic corpus, it becomes probable that this scenario of overtaking the United States by China will never materialize.
For the European Union's GDP, on the other hand, the overtaking by China could occur as early as this first quarter of 2021, and in the absence of awareness of the need to change approach, the gap between China and States United on one side, and Europe on the other, will continue to grow year after year.
