Report
The dreadful problem of France and Italy: Both exports and domestic demand are weak
France and Italy are faced with both: Weak exports, due to weak cost competitiveness relative to the ir level of product sophistication; Weak domestic demand, due to weak productivity ( and therefore real wages) and profitability (hence investment). These two countries are in a difficult situation if both exports and domestic demand are weak. In that case, what policies can they implement? An internal devaluation (a reduction in labour costs) to stimulate exports, but in the near term it would weaken domestic demand even further; Stimulation of domestic demand by an expansionary fiscal policy, but this would be very ineffective due to the low level of productivity gains which limits potential production. The weakness of productivity gains weakens both the demand and supply of goods and services.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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