What macroeconomic dynamics after the attacks in France?

Will the recovery of the French economy be undermined by the murderous attacks in Paris on November 13? Beyond the dramatic aspects and explanations that are not directly our responsibility, it is the question we must ask.
For the French economy this negative shock arrives while it is emerging from a long period of very low growth. In recent months, elements for a more sustainable and favourable trajectory were progressively put in place. The attack could challenge this change in trend. The risk would be to see the economy converging to a slow growth profile that couldn’t generate net jobs creation.
Spontaneously the immediate answer to the question suggests a “wait and see” behavior. The uncertainty engendered by a series of attacks creates a significant blur on the future situation. From the consumer side, additional uncertainty could be perceived through an expected fragility on the labor market. In this case, it would be rational for him to reduce his consumption  and save more today to face a weaker situation in the future. As for companies we can imagine that the uncertainty caused by the terrorist attacks could lead to more cautious behavior especially in investment decisions. This would be very damaging because the economic cycle is built over time around the investment.
Therefore one could imagine a negative impact on the activity with an increased risk of recession.
Yet it is not so simple. Continue reading

Video – Interview – Philippe Berthelot on the Credit Market – Financial Times

My very good friend Philippe Berthelot gave an interview to the Financial Times on the credit market : Accurate and Relevant

Click on the link

Landmarks on Euro area growth in the first quarter

Growth figures in the Euro Area have been pretty good during the first quarter. The trend has dramatically accelerated in Spain, France is out of a long period of very low momentum and Italy is out of its recession.

Nevertheless, even with these good news, it is too early to be sure that the long stagnation that has characterized the Euro Area since the first quarter of 2011 is over. Austerity policies that were put in place at this moment have provoked a long recession in the Euro Area. The exit from this episode may start in 2015 with the new ECB monetary policy that focus on demand. 4 years to exit from the negative impact of these austerity policies that imagined that reduction in demand could imply a strong growth momentum (sic)
The current economic policy put demand at the front place to try to change the business cycle profile. I think that this is the best recipe to converge to a more virtuous business cycle.

This post wants to show the economic activity profile in the Euro Area and its main countries at the end of the first quarter. I do not give details of on composition of growth because usually only the GDP number has been published.

GDP Quarterly change
This graph shows the GDP quarterly change at annual rate. The red bar for the first quarter of 2015 shows strong performance in Spain, France and Italy. The German number is below expectations. Continue reading