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Which EU country is winning our economic pentathlon? - The Economist   

The European economies are in for a troubling few years. Germany is probably in recession. The European Commission is forecasting growth of just 0.8% for the EU as a whole in 2023, and little more in 2024. Inflation is coming down only slowly, prompting the European Central Bank (ECB) to raise rates yet again at its September meeting. Business confidence continues to worsen. The commission has asked the ECB’s former boss, Mario Draghi, to come up with a plan to strengthen Europe’s economy. It could make a book, working title: “Whatever it Takes (to Grow)“.

Not all countries are equally affected, though. As our calculations show, they perform differently on the five major challenges that are facing all European economies. Demand will have to be lowered to fight inflation; and the resulting higher rates on debt-piles will weigh against spending. Ageing societies lose workers to retirement faster than youngsters enter the labour market. Meanwhile, the fight against climate change requires industry to transform; and trading with autocracies is increasingly a risk in the new geopolitical age. Welcome to our European economic pentathlon, where we award each country a gold, silver or bronze medal in each of the five disciplines, according to our assessment of their performance. 

We start with demand. The ECB is required to increase interest rates to bring down inflation. That is not always working according to plan. In Austria annual inflation is still at 5.8%, while it is down to 2.4% in Greece, close to the ECB target of 2%. The same interest rate could thus soon be too low for some, and too high for others. Additionally, the central banks of the seven EU countries that are not in the euro tend to try to ensure that their economies do not get too out of whack with the euro zone. Ideally, inflation in all EU countries should be close to the euro-zone average, even in those outside it. Those whose inflation rate deviates too much from the euro-zone average (currently 4.3%), whether below or above it, will have a costly period of adjustment ahead of them.

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