The Eurozone & EU economy equally is expected to start recovering by the end of Q3 2021. But until then the economies of the euro area member countries will be characterized by high budget deficits in their annual government budgets, by high public debts (in some euro area member countries general government debt will exceed 200% of annual GDP), while continuous and repeated hard economic shutdowns in many cases have hopelessly reduced the value of fixed capital in businesses and in certain types of public infrastructure.
by Thanos S. Chonthrogiannis
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At the same time, the Eurozone and the EU in general have an increasingly ageing population compared to other countries such as the USA, China, Russia, etc.
The continuous applied monetary policy of the quantum easing for more than ten consecutive years and the avoidance of fiscal policy implementation throughout this period has brought the short-term lending rates of the euro to a negative level, but unable to create artificial inflationary pressures that will lead to growth of more than 3% of GDP per year in the euro area economy.
Apart from the absent applied fiscal policy which does not exist for reasons of non-common fiscal, fiscal, and economic policy in the euro area economy, all the proposed economic policies refer mainly to two axes and always refer to the macroeconomic level. More specifically:
1. That annual GDP growth will result from a combination of employment growth about 30% and
the remaining 70% will come from an increase in labour productivity. Given that all the financial programmes drawn up and any macroeconomic measures are being carried out in support of this dual objective.
2. The second alternative policy proposed mainly by Socialist-style European parties are the
governments of the member countries to “throw money into the market by helicopter” and by continuing to provide high bonuses in combination with fewer taxes, so that businesses can hire people and in combination with the “necessary” state investments to move the economies of the member countries at an increased rate of growth.
In this case, however, employment would increase more, but productivity would be minimal. But this policy is entirely wrong because the economies of the member countries will have huge budget deficits in their annual government budgets and exceptionally large amounts of public debt.
What we are proposing as Trust Economics is for economic policies to focus on increasing productivity.
Increasing productivity
Productivity growth depends mainly on the quality of enterprises (technological training-upgrading, low operating costs, use of cutting-edge technology, etc.). But the quality of the companies in turn depends on their size, the quality of the workers and the challenges they face from competition.
For example, workers without upgraded skills and training on their work in an oligopolistic or closed market will have neither good quality nor low-cost service/product.
It is common for small businesses to be the backbone of the economy and for these economic units to be the model that European economies have supported for decades. But this economic model has completed its cycle.
How will this change be achieved?
The governments of the euro area/EU member countries should move on four main policies:
1. Taxation
All member country governments should agree on a commonly accepted low tax rate and generally low levels of taxation, which should place a minimum tax rate on salaried work to increase the incentives for those equipped with good education and work skills to choose to work in organized business units and not to move labour in the shadow work environment.
2. Vocational training
Education and, more generally, vocational training should focus on increasing productive skills that will become personal-individual work supplies for each worker so that these workers can then claim good labour wages on the free market.
In this way both the working scientist-graduate and the craftsman will constantly upgrade and you during his working life his skills.
Here vocational training, provided it is provided by private schools, can be subsidized by the State.
1. Increasing women’s employment
Increasing women’s employment will increase/improve their individual income as well as the income of their families. Women’s employment is at a record low compared to the US.
In addition, increasing the employment of women that will improve their income will reduce gender inequality and mitigate the age imbalance between pensioners and workers that is constantly increasing in favour of pensioners.
2. Financing economic development from public resources
Based on the projects drawn up by the EU Commission, public funds will finance those development-related projects in the early years of the next decade after 2020.
From where these public resources should be found we mention it in the analysis entitled “The Problematic Course of the Eurozone (EU) Economy and the Proposed Corrective Policies” and of course, not by borrowing from the governments of the member countries that will skyrocket their public debt.
These public funds will finance public investment and programmes for higher productivity and participation in work.
The success of these policies will not only increase productivity, improve incomes that will either be directed towards consumption or saving, but also increase the size of middle-income citizens.
In addition, the number of employees who will become middle managers of enterprises will increase. The middle managers of enterprises constitute in many economies the most productive group of workers and the quintessential that supports the proper functioning of the state of the Democracy.
The working class will benefit in turn because there will be an increase in those with skills sought from the labour market which in turn will offer decent pay.
At the same time, trade union funds will be strengthened and have fewer problems and frictions with employers and business administrations in general.
