Better policy coordination – or policy mix – is key for better economic outcomes, especially since the monetary policy space is limited. In the euro area, growth has decelerated to about 1% and is not forecast to meaningfully pick up in the immediate years ahead. Although a recession has been so far avoided, the balance of risks is tilted to the downside.
There is a long list of short- and long-term factors that contribute to this weak economic outlook, like the expanding trade wars and a possible hard Brexit, as well as vulnerabilities in the emerging markets and geopolitical turbulences in the Middle East. Europe faces its own structural problems, such as population ageing, declining productivity growth, as well as populism and indebtedness.