The euro zone’s demand stimulus should not be overlooked

Growth forecasts for the euro zone have become highly pessimistic ; this now includes those of the ECB. Yet the euro zone is being buoyed by a very large demand stimulus: increase in the fiscal deficit, acceleration in wages, fall in inflation thanks to the fall in oil prices, very low interest rates. Even though there is clearly a cyclical slowdown in industry, it is important to not forget that this demand stimulus will provide a large boost to demand for services, and to not succumb to excessive pessimism or be fooled by the contrived and unconvincing arguments (trade war) that underpin the se weak growth forecasts.