Euro zone in 2019: Stimulation of demand while supply is the problem

In 2019, the euro zone is benefiting from significant stimulation of demand: acceler ating wages, falling inflation, expansionary fiscal and monetary policies . Yet, the euro zone’s problems are supply side problems: Deteriorating cost competitiveness and market share losses; Rapid shift from combustion engine cars to electric cars, which will make part of the automotive industry ’s capital useless ; Weak capital modernisation by companies, weak innovation; Low level of labour force skills. What happens when demand is stimulated in a region that suffers from supply side problems? The effect of the stimulation of demand on growth is weakened; The stimulation of demand does not change the medium-term outlook for the economy in this region; it may even worsen it if some demand stimulation components worsen the supply situation ( rising wages).