Berenberg's experts have asked to ward off any pessimistic thinking about the Eurozone because, although it is true that the US can take a certain advantage in terms of economic growth In the coming months, the region "is on the way to a golden decadeIn fact, they assure that the Gross Domestic Product (GDP) will continue to improve because the euro zone will be able to "stay on the right track."
Laggards again? Will the Eurozone make a mistake in its policies and fall far behind the US in recovering from the recession caused by Covid-19? Those are the questions many investors are asking, especially given history. Experience says that the European recovery is usually somewhat 'hesitant' (you just have to remember what happened after the Lehman Brothers crisis), and hence the doubts about what may happen now that it seems that we are beginning to leave the pandemic behind.
"Some observers fear that insufficient fiscal stimulus, premature fiscal tightening and 'hawkish' leanings from some policy makers at the European Central Bank (ECB) could put the brakes back on the euro zone"say Berenberg experts, who believe there are no grounds for such concerns.
First, because the latest data have confirmed that the GDP of the euro zone fell less than expected between January and MarchSecond, because different organizations are improving their forecasts for the region. The last to do so was the ECB, which at its economic policy meeting raised its GDP growth forecasts up to 4.6% in 2021 and 4.7% in 2022.
According to analysts at the German firm, "pessimists miss the key point", and is that despite the fact that the Eurozone will not grow as fast as the United States, the region will continue to do "quite well". "Most of the economic data is exceeding even our most optimistic expectations," they acknowledge. And they point out that after returning to its pre-coronavirus GDP level at the end of 2021, the euro zone economy "will likely continue to grow at a rate higher than its pre-Covid-19 trend in 2022 and beyond." In his opinion, "like other parts of the world, the Eurozone could be on the way to a golden decade".
In Berenberg they recognize that there is a "persistent gap" between the euro zone and the US. They know that investors' concerns have "a kernel of truth" because the United States, having weathered the recent winter wave of the pandemic with fewer restrictions than the Eurozone, could maintain "a small growth pace advantage over the Eurozone until 2022. ". However, the German firm's strategists are confident that the euro region will "get the policy right" and continue to show strength going forward.
SUCCESSFUL POLICIES AT A CRUCIAL MOMENT
"The Eurozone was right in its economic policy response to the Covid-19 emergency. The ECB reacted quickly and aggressively. Fiscal policy kept real disposable income more or less constant during the recession, ERTEs and other measures prevented massive layoffs. and business support helped preserve the supply potential of the economy. " They were, says Berenberg, the right policies at a crucial moment, and all indications are that the euro zone will stay the "right course".
These analysts see "no sign that there is going to be a major error in economic policy." The ECB guidance indicates a ultra-lax monetary policy for the next few years, even if the asset purchases they are gradually reduced as the economy recovers. That without forgetting, they emphasize, that thanks to recovery fund of 750,000 million euros From the EU, fiscal policy in the euro zone is likely to be "at least as expansive as that of the United States in the future."
While much-discussed fiscal rules are suspended or applied with flexibility, "we see little political appetite for a serious fiscal tightening at the national level," insists Berenberg, who also believes that the trajectory of public debt "is more challenging" and "Risks of tax increases are greater in the US than in the Eurozone."
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