Conflits d'intérêts
Authors:   Département des diagnostics de l'OFCE, Sigogne Philippe , Fouet Monique , Chagny Odile , Khoury Naaman , Passet Olivier , Rifflart Christine , Milewski Françoise , Coquet Bruno , Daniel Jean-Marc , Péléraux Hervé 
Published: October 2008

Everywhere in the industrialised world, monetary and financial obstacles to economic growth still persist today. The situation is all the more unsettled as tentative cooperation has been replaced by confrontation in international relationships.

In the USA, the recovery has been a typical one, in terms of speed, but its magnitude has been exceptionally small. It had come to stop during the summer because the decrease of the fed funds rate had not been followed by an equal drop in other interest rates. The economy can hardly get back on track of slow growth before the beginning of 1993.

In Japan, the speculative bubble is being deflated rather than blown. But that still leaves a bulk of overinvestment while the debt burden grows heavier. Budgetary measures can prevent deflation but will not be able to spur rapid economic growth.

In Germany, the Bundesbank will not spontaneously change its strategy before mid-1993 because inflationary pressures are still strong. Nevertheless it might so before then, should events take a menacing turn for Germany itself. As long as German interest rates will remain too high for other European economies, there is a risk that turmoil on exchange and financial markets turn into havoc.

Meanwhile many European countries have decided to adopt restrictive budgetary policies. Therefore they are faced with stagnation in the best set of assumptions, probable recessions even if everything does go smoothly. The logic in such a framework is that of competition for market shares, and not the dynamics of European cohesion.

In France, the economic climate in September 1992 is clearly deteriorating. In that country as in many others, the surge during spring has proved termporary. Firms are once more cutting their investment plans while consumer confidence is decreasing further. Monetary aggregates have stopped growing. The turmoils of September have made the situation worse, and the year will end with a decline in activity. Should interest rates stay where they are, GDP growth will reach at most 2 % in 1992.

Given the uncertainties about foreign economic policies, forecasting is very difficult. One option is to assume that the easing of German monetary policy will only take place around mid 1993. Hence a recovery could only begin in France at the beginning of the second half of that year. In that case, GDP would grow by 2 % should budgetary policy allow for an increase in expenditure of not less than nominal GDP. Household consumption would be the first to recover, and only slowly, followed by investment of the productive sector ; imports and exports would grow at a similar pace. There would still be a small commercial surplus while inflation would be very moderate. Unemployement would increase despite a strong « social treatment ».

But this is an average forecast, describing the mechanisms involved instead of the breaking points to which they might lead. Should economic policies in Europe remain unchanged, turmoil will occur again and again. French market shares would then shrink while deflation would actually induce a reduction in expenditures on usual goods and services. GDP growth might be substantially below the 2 % figure. On the other hand, one cannot entirely rule out the assumption under which the Bundesbank changes its attitude, enabling France to enjoy significantly faster growth in 1993.