Closing the Gap: Can Europe’s Economy Finally Catch Up with the U.S.?
The year 2016 has been characterized by growing uncertainty about the strength of the global economy: uncertainty about the ability of emerging markets—and especially China—to successfully address cyclical and structural weaknesses in their economies; uncertainty about the impact of the slowdown on advanced economies, namely the United States and Europe; and uncertainty about the impact of a weakening global economy on commodity prices.
In the U.S., the primary campaigns are throwing traditional assumptions about the November race out the window. Some pronouncements made by the presumptive Republican nominee could very well rattle markets, while the Democratic race continues as voters assess the trade and finance policies of the two candidates. Markets have not reacted yet, but that could change depending on how the race evolves in the coming months, especially once the two parties have officially selected their respective nominees in the summer.
At the same time, Europe could be deeply affected by a “No” vote in the upcoming British referendum on continued membership in the European Union. Thanks to the ongoing refugee crisis, the Schengen system of free travel in most EU countries has been suspended and populist political forces are trying to exploit fears. Furthermore, growth in the EU, and in particular the euro area, is still not strong enough to reduce unemployment substantially. In crisis-hit countries, even in those that are bouncing back, the parties and governments that were forced to implement “austerity” measures have been punished by voters.
As the American voters evaluate their choice for the White House on November 8, the debates over economic and foreign policy issues in the U.S. all through the campaign toward Election Day will reverberate well beyond the United States. This Issue Brief is part of AICGS’ Annual Symposium in Germany, examining key issues at stake for the U.S. and Germany, including U.S. expectations of Germany and Europe; German and European expectations of the next President; chief economic challenges ahead on either side of the Atlantic; and areas of cooperation and conflict across the Atlantic in dealing with regional and global crises.