Lazard Investment Research: Structural Reform in Europe, Two Lessons from History and Looking at the Current Landscape.
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The austerity versus stimulus debate that has permeated the European economic and political environments ...
The austerity versus stimulus debate that has permeated the European economic and political environments
since the financial crisis began has clouded a more important driver of economic performance: structural reforms. Although structural reforms are underway throughout Europe—but more importantly in peripheral countries—many observers will swiftly point out that the effect of these reforms has not taken shape. Observing representative exam- ples from reform history in Europe (the United Kingdom in the early 1980s and Germany in the period 2002–2005), we draw attention to the fact that the immediate years after these reforms exhibited slower economic growth, but emphasise that the long-term effect following this initial period was significantly positive. As the current reforms go through their short-term, slow growth phase, we believe this could translate into a favourable multi-year outlook for the region.
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