The Sound of Economics cover image

The Sound of Economics

Where are Europe's animal spirits?

Mar 12, 2025
Jeromin Zettelmeyer, Director at Bruegel, and Peter Praet, a seasoned macroeconomist from the ECB, dive into Europe’s economic landscape. They discuss the contrasting growth rates of the U.S. and Europe, emphasizing the need for structural reforms. The conversation highlights the challenges of a weaker euro and the call for fiscal expansion. They also examine the ECB’s monetary policies and the impact of geopolitical tensions on Europe's economy, revealing urgent investment needs and potential strategies to enhance local investment.
39:52

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Quick takeaways

  • Europe's economic recovery is hindered by supply shocks and a high household savings ratio despite ECB's initial positive predictions.
  • To stimulate growth, Europe must implement structural reforms and embrace 'animal spirits,' but political will remains a significant obstacle.

Deep dives

Economic Disparities Between the U.S. and Europe

The U.S. economy is expected to grow significantly faster than other advanced economies, largely due to its favorable conditions, which include strong consumer confidence and aggressive fiscal policies. In contrast, Europe has been grappling with a series of supply shocks that have hindered its recovery, leading to a surprisingly high household savings ratio. Despite initial predictions from the European Central Bank (ECB) for a rebound in consumption and investment, this recovery has yet to materialize, raising concerns about the economic health of the region. The ongoing uncertainty surrounding the U.S. economy serves as both a risk and a point of reflection for Europe, underscoring the need for structural reforms to stimulate local investment and spending.

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