What will happen if growth in the euro zone remains persistently weak?

- Possibly, because of short-term reasons (increase in savings, slowdown in wages, rapid reduction of fiscal deficits) as well as long-term ones (low level of productivity gains, population ageing) growth in the euro zone will remain durably far weaker than in the rest of the world.
- One would then have:
• persistently lower interest rates and return on equity in the euro zone, as well as smaller capital outflows, and a depreciation of the euro;
• accelerated de-industrialisation in the euro zone, because companies will focus on markets enjoying more rapid growth, low levels of investment, and this will lead to self-perpetuating weak growth and hamper deleveraging;
• increasingly pronounced internationalisation of European companies;
• Central European countries pursuing a different strategy from economic and financial integration with Western Europe.
Natixis Flash Economics 351 20100706

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