Europe policy struggles are to avoid decades of Japan-like economic stagnation

Most European policies have to work out in order for Europe to achieve sustained 2-3 % GDP growth. The alternative is Japan levels of 1% slow economic growth.

The EU had 2.5% GDP growth in 2017 and is forecast to have 2.3% growth in 2018 and 2.0% growth in 2019.

Europe’s aging population and low birthrates will see a decrease of 2 million people per year in the workforce without immigration. Current immigration levels have been enough to hold workforce losses to 1 million people per year. The immigration has resulted in ethnic tensions and other problems.

The choices Europe faces are
* Work a lot more hours and delay retirement or accept more immigration and find ways to integrate the new people into society. Europe will probably have to do both but figure how to reduce the downsides of current immigration.
* Try to make a lot of stimulus work and get successful with technological innovation

Stimulus and policy so far

If national and European-level economics reforms and investments in innovation, infrastructure, and energy are achieved, sustained GDP growth rates of 2 to 3 percent a year would be possible over the next decade, according to McKinsey.

The Investment Plan for Europe (“Juncker investment plan”) started in 2014 and was leveraging public and private money to fund €315 billion of investments over three years. It is claimed to be 93% effective so far.

EFSI expected to trigger €294 billion in investments
93% of the original €315 billion target met
412 infrastructure and innovation projects approved
418 SME financing agreements approved
around 644,000 SMEs expected to benefit

The EU has launched the Digital Single Market (DSM) project, which aims to reduce barriers for both citizens and businesses. The hope is that a Digital Single Market could add as much as 4 percent, or €415 billion, to the EU economy. The European Commission has proposed the Capital Markets Union, which may eventually make it easier for European startups to find capital for growth.