Research on the economic outlook for Europe over the next decade, from PricewaterhouseCoopers, warns that despite a seemingly bright future for “Euroland” there is a need for caution. On the back of figures showing that the “feelgood” factor reached its highest level for eight years in 1998, the research identifies four possible scenarios.
The first, named “The Golden Triangle”, is one in which open markets and continuous technological advance deliver strong steady growth thus leading to further market liberalisation.
In the second, entitled “On The Edge”, Europe experiences strong but highly unstable growth driven by technological progress, market liberalisation and fierce competition.
The third, called “The Last Castle”, is one where EU governments become regulatory and protectionist as public opinion rises against economic instability and insecurity.
Finally, “Drowning Spires”, is a “wild card” scenario where climate change leads to social unrest, and economic disruption thus leading to a higher profile for green issues.
John Hawksworth, head of macroeconomics at PwC, warned of the need for caution. He said: “Europe has been moving steadily towards more open and integrated markets but there is always the danger of a backlash if this leads to periods of instability and insecurity.”
The wide-ranging survey also predicts that economic growth is likely to slow from just under 3 percent in 1998 to around 2 percent this year.
Despite this, the firm predicts that a recession is avoidable, provided there are no major shocks in the world economy.
Winners in 1999 are expected to be Ireland, Finland and Portugal where growth will be the fastest. Germany and Italy are expected to be the slowest growing economies with the UK last on the list.
Chief economist at PwC, Rosemary Radcliffe, said: “The Euroland economy is still fundamentally healthy but it is not immune to global economic developments. A stable euro is desirable but an overly strong euro could be very damaging to European business.”
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