RESEARCH | iASES (ex iAGS)
Growth in the European economy is holding up but the general outlook is less bright than in recent years. The anticipated slowdown largely results from the gradual attenuation of the post-Great Recession recovery momentum and the convergence of growth rates towards a lower potential growth path. The slowdown of growth coincides with a revival of political turmoil -Brexit, Italy’s public finances, the trade war and turbulences in some emerging countries-. The upturn will come to an end at some point, and the euro area is not yet prepared for that, as imbalances persist and the institutional framework remains incomplete. The euro area has moved into a large trade surplus, which may not be sustainable. Nominal convergence remains an important issue that should be addressed by appropriate policies, beginning with surplus countries. Moreover, the incomplete adoption of a Banking Union may be insufficient to ensure banking stability. The ECB could have to come to the rescue with extended unconventional policies, complemented with automatic stabilisation measures working across borders within EMU.
The social situation has improved in the EU - on average, the unemployment rates across European countries are back at their pre-crisis levels- but differences across countries and sections of the population are huge. Policy makers need to be aware of possible trade-offs and synergies between economic, social and environmental goals in general and the Sustainable Development Goals (SDGs) in particular. In line with the SDGs and intended goals of the European Pillar of Social rights iASES aims at promoting policies - expanding social investments, pro-active industrial policies, reducing working time, increasing collective bargaining- that address these goals and overcome the direct and indirect negative consequences of unemployment.
Climate change is arguably the most serious challenge that we collectively face. Computing carbon budgets can be useful to warn policy-makers about the effort to be delivered in order to put society on the road to environmental sustainability. iASES evaluates the "climate debt" which is the amount of money that will have to be invested or paid by countries for them not to exceed their carbon budget, leading to three key policy insights. First, there are few years left for major European countries before exhausting their carbon budget under the +2°C target. Secondly, the carbon debt should be considered as one of the major issues of the decades to come since in the baseline scenario it represents about 50% of the EU GDP to stay below +2°C. Thirdly, the results of the estimation of this carbon debt are subject to numerous moral, ethical and technical assumptions that should motivate further and urgent investigations on this subject, critical to climate change mitigation, from both state bodies and independent research institutes.
The Report >>
The independent Annual Sustainable Economy Survey (iASES, formerly iAGS) brings together a group of internationally competitive economists to provide an independent alternative to the Annual Growth Survey (AGS) published by the European Commission. The iASES is published simultaneously with the Annual Growth Survey of the European Commission at the start of the European semester.
The initial project emerged seven years ago and was referred to as the independent Annual Growth Study (iAGS). Within our project team, we decided to give more importance to the 2030 Agenda for Sustainable Development (ASD) -adopted in September 2015- that sets 17 Sustainable Development Goals (SDGs). The goals are wide-tanging, from well-being, poverty, health, education, gender equality, decent work and economic growth, reduced inequalities, industry, innovation and infrastructure, to inclusive cities, clean water and energy, biodiversity, climate change and peace, justice and strong institutions.
The iASES seeks to irrigate and inform the public debate on economic, social and environmental sustainability in Europe. These issues are complex and cannot be addressed with off-the shelf or one-size-fits-all expertise. Instead, an open and in depth analysis of hypotheses, empirical evidence, options and foreseeable consequences of possible policies is required.
iASES highlights topics, that often go overlooked, yet are crucial to provide solutions to move the economy towards sustainable economic growth while maintaining price stability and full employment and preserving social progress The project tackles public finances, unemployment, public debt, and formulates alternative and more efficient strategies. As a starting point, we rely on our magic polygon of well-being oriented economic policy (see below).
After the 2007 financial crisis, our environment is being shaken up by increased inequalities, social and political unrest, the project leaders firmly believe in the need for an intellectually independent, conceptually pragmatic and fundamentally transparent analysis of the facts and policies that drive European economic, environmental and social progress now and in the future.
Assessing the policy mix of interdependent EMU countries:
Using an established model flexible enough to analyze varying scenarios of policy mix and varying sets of hypotheses;
Assessing the path of the policy mix in the Eurozone and EU, taking into account interdependencies between EU member countries and the rest of the world.
Short term forecasts for EMU countries:
Providing a description and in depth analysis of the current environmental macroeconomic and social situations of countries;
Analyzing the macroeconomic imbalances within the Eurozone in particular question of competition and movements of capital;
Offering economic forecasts for current and next fiscal years.
Assessing EU policy mix:
Including a broader definition of economic policy that encompasses monetary policy as well as traditional fiscal and tax policies;
Taking into account the interaction between different policy positions of Member States and the ECB.
Assessing the AGS:
iASES provides in-depth analyses on Eurozone and major EU countries. Fiscal policy, monetary policy, labour market policies, social policies, and environmental policies are critical for the economic prospects of the EU and will determine institutional advances in the near future.
OFCE, the French Economic Observatory, is leading the project in association with AK from Austria, IMK from Germany and ECLM from Denmark. The project is open and all material will be available under a creative commons licence.
A Scientific Council, representing those institutes involved in the project as well as independent internationally renowned scientists, will evaluate the work, assess the organization of the project and advise iAGS on the research agenda.