July 6, 2017    6 minute read

Key Reasons for the European Recovery

Chapter 1: With or Without EU    July 6, 2017    6 minute read

Key Reasons for the European Recovery

Against all odds, and contrarily to a generalised gloomy scenario of the past years about the destiny of the European Union, the Euro area has surprisingly recorded a stronger than expected economic growth in the first semester of 2017 and a rather optimistic and reinvigorated political turnaround in favour of the EU.

An Era of Change

During this crucial year for political elections in Europe (2017), a combination of key economic and geopolitical events (game changers) seem to have suddenly shifted voters’ preferences towards more reassuring and realistic political options (i.e. pro-EU sentiment), in spite of new record levels reached by abstention in some important political elections and the rise of some radical parties.

Thus, apparently, a new political and economic mood is spreading across Europe re-energising a strong interest in the integration process of the Euro area and strengthening the Union among the 27 member states. This sentiment of hope for the future of the EU seems to reflect a strong desire of many voters to pursue a more balanced and sustainable economic and social growth model in the region. A model that represents a better and more effective compromise among multiple goals, ideologies, interests, and visions such as, innovation-led growth; enhanced competitiveness; market liberalizations balanced with some protectionist measures for strategic industries; labour market reforms to reduce high levels of unemployment and increase productivity, but also programs for social inclusion and the reduction of inequality and poverty. Furthermore, it also includes an EU defence spending program; an integrated common fight against terrorism, a strengthened cooperation on climate change and immigration; and a stronger long-term commitment in favour of free trade and sustainable globalisation.

Thus, in spite of the gloomy outlook about the Eurozone and its possible break up scenario of the past years, which might have discouraged a large number of UK voters at the “Brexit” Referendum of 2016 to remain in what they perceived to be a “Dysfunctional Union” led by Eurocrats, it seems that the threat of a potential dissolution of the region has actually inspired (at least for the moment) a renewed passion for the Union, its identity, and shared values, and has led to the stunning victory of pro-EU leaders at the recent political elections of 2017.

Key Indicators

Among some of the key economic, social, and geopolitical factors that have rapidly shifted the political preferences of many voters towards less extremist and Eurosceptic leaders and parties, noticeable ones are the following:

The sweeping victory of the reform-minded centrist candidate, Emmanuel Macron, at the French presidency election and the amazing success of his new party, La République en Marche; the British Prime Minister Theresa May’s inability to win the party’s parliamentary majority at the snap election in June 2017, which seems to have weakened her negotiating power in the Brexit negotiations with the EU, despite the support of the Northern Irish DUP, which might probably lead to a softer “Brexit” (a ‘soft’ withdrawal from the European Union). However, right now it is difficult to predict whether there will be a ‘soft’ Brexit deal or ‘No Brexit’ deal at all, since the UK Government may not get a great bargain from the negotiation with the EU, at least in the short-term. In the long-run a compromise is more likely. Other key economic, social, and geopolitical factors that have rapidly shifted the political preferences of many voters at the recent European elections include: the demise of a number of populist and Eurosceptic parties at the 2017 political elections in Europe (i.e. Austria, France, and Netherlands); the perceived increasing economic and political uncertainties about the future trade agreements and economic prospects of the UK and the US; a great uncertainty surrounding Donald Trump’s ability to timely and successfully deliver on all his “Trumponomics” policies and promises to the voters (i.e. 3% – 4% GDP growth); the sudden and unexpected economic recovery of the euro area; and also the peculiar features of the European States’ electoral systems which, somehow, do not favour the rise and victory of another Donald Trump case in Europe.

After all, many of the so-called populist and anti-establishment voters in Europe seem to be driven in their political preferences more by a spirit of protest and frustration with the current status quo and by the lack of satisfactory job/career opportunities than by real ideological convictions. Thus, as soon as they have realised, prior to the elections, that the promises of easy and quick fixes, and painless solutions to long-lasting problems of their countries’ economies were just pure illusions and unrealistic projects, they have immediately changed their political orientations towards “safer havens”. Young European voters, in particular, are very eager for change and a real turnaround. They seem to have voted for a brighter future for themselves in their countries and in the European Union after a number of years of painful uncertainties (the lost decade).

The Role of Millennials

Like Millennials living in other parts of the world, European Millennials appreciate change, are always connected, well informed, and digitally savvy. They naturally embrace the vision and benefits of disruptive business models, ideas, and technological innovations such as, industry 4.0, Big Data and business analytics, deep learning, A.I., machine learning, cognitive computing systems, digital apps and real-time data, robotics and IOTs, fintech and blockchain trade finance platforms, and the great possibilities these exciting innovations may bring to economic development. They appreciate change and innovation, and often times, even disruptive innovative models, however, they do not seem to appreciate a leap into the unknown when it comes to their future (i.e. EU dissolution and Eurozone break up), especially after having lived for most of their lives in the middle of the slow growth and gloomy atmosphere that followed the Global Financial Crisis of 2008 and the Great Recession. Thus, many Europeans voted accordingly at the 2017 political elections. They have realized that an anti-EU vote and a vote that would signal their desire to exit from the Eurozone would be just too risky and a real leap into the unknown, after the surprising events of the Brexit vote and Trump’s victory at the election in the US (i.e. the unthinkable that becomes a reality).

Young Europeans, like most Europeans, by and large, have positive feelings about Europe, the EU, and the Eurozone, and they wish to see a stronger and more stabilised European Union to succeed. An EU that can offer them a better future. A European Union that remains a key and relevant player in the world economy; a leading innovation-led growth environment; a solid center of democratic values and lifestyles; a place of social justice; and a leading global benchmark for environmental and sustainability projects (green economy, renewable energy economy, circular economy, biotech sector and bioeconomy, green bonds investments).

Stay tuned for the release of Chapter Two on Friday the 7th of July, 2017.

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