Many experts believe we are at the beginning of a new golden economic cycle for Europe, equivalent to the "Seven years of plenty" described in the famous biblical story of Egypt's Pharaoh 's dreams. Are we, really?
It's one of the Bible's best known stories - The King of Egypt dreams of seven fat cows feeding on the reed-grass near the Nile river. Then, seven lean, ugly cattle came up out of the river and ate the seven fat cattle, and Pharaoh awoke. Later, he calls Joseph, then a prisoner, to interpret his dream. Joseph told him that the seven fat cows represent 7 years of abundance, and the 7 lean cows represent seven years of famine which will consume everything.
I am neither a dream interpreter nor a prophet, but I believe Europe is at the end of its "seven years of plenty", not at the beginning. The rise of populism, the refugee crisis, the Greek debt, the threat of terrorism, all of these have masked the fact that Europe's economy has been doing globally well since 2010. If we look at productivity, for instance, we see that Europe started to recover as soon as 2010, 7 years ago. Productivity is the single most important structural factor for economic performance. Unemployment rates, a long standing European issue, have started to go down in 2013- 4 years ago.
Of course not all EU countries have performed as well as Germany (which divided its unemployment rate by 2 since 2009, from 8% to 4%). France, for instance, saw its unemployment rate rise from 7% to 9.6% during the same period. However, globally, the European economy is now or near at its best, with no major issues on sight in the next year or so.
The problem is that many EU countries have not used the seven years of plenty to prepare for the next economic downturn. And there will be a downturn, no doubt. When it will happen, some key long-term problems such as the high debt and non-debt obligations (retirement pensions or healthcare), and limited abilities by central banks to stimulate growth (interest rates are already near 0%), are likely to create a big squeeze, hitting first those who did not benefit so much from the 2010-2017 Goldilocks period.
The recent rise in European consumer confidence may be the realization that Europe's economy has been not that bad after all during the last years, despite all the bumps. But it seems to me that consumers (and media) are now looking in the rearview mirror, and not really seeing what's coming ahead. I hope EU governments and heads of state are already preparing for the seven years of famine. Or we may well see a big herd of simple and dangerous ideas consuming Europe -once again.
G. Le Nigen