November 16, 2024 Today at 11:17 am
If Europe wants to compete with the US in terms of economic growth and innovation, European companies and investors must show more risk appetite, said Saturday in the debate among chief economists at the Finance Avenue money exchange.
What should we actually think of the special man who will soon move back into the White House in Washington DC? And above all, what will be the consequences for the European and world economies? That was the central theme during the main economists’ debate on Finance Avenue, the money exchange that De Tijd and L’Echo organized on Saturday on the Tour & Taxis site in Brussels. Peter Vanden Houte, the chief economist of ING Belgium, and his colleagues Jana Jonckheere (National Bank) and William De Vijlder (BNP Paribas Fortis) entered into a debate.
An initial poll among the large audience that showed up made it clear that the re-election of Donald Trump has many investors scratching their heads. Although the financial markets responded very enthusiastically to the Republican’s election victory. “An important note is that the enthusiasm was limited to Wall Street,” Vanden Houte underlined. ‘European stock markets have lost ground since Trump’s election victory. The Chinese stock market has even lost 6 percent.’
That discrepancy is not illogical. ‘Trump plans to significantly increase import duties on goods from the European Union. That will hurt the export-oriented European economy.’ We better brace ourselves, especially in Belgium, Jonckheere adds. ‘Almost 5 percent of the added value we create in this country is exported to the US. One of the assets in our country is the highly developed pharmaceutical sector, but those companies get a significant part of their income from the US.’
Trump’s policy plans also include a migration stop and significant tax cuts for companies. “All of Trump’s ideas are inflationary,” says De Vijlder. ‘And so there is a good chance that central banks will no longer cut interest rates so sharply. The ultra-low interest rates of yesteryear are no longer coming back.’
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Trump is making his comeback at a time when the economic situation in Europe does not look promising anyway, the economists point out. ‘Economic growth in the eurozone is minimal, the once-vaunted German car industry is in decline, and this continent has to catch up with the US and China in terms of innovation.’
It is perhaps exemplary that we already have extensive AI regulations in Europe, but no AI companies yet.
Peter Vanden Houte
Chief Economist ING Belgium
This innovation lag is an important issue, De Vijlder also points out. ‘I hear from my colleagues in the US that the revolution in artificial intelligence (AI) is already seeping through into the broader economy. We missed that train a bit here.’ This explains, among other things, why the American economy is growing much faster than the European economy.
“It may be exemplary that we already have extensive AI regulations in Europe, but no AI companies yet,” Vanden Houte adds. AI threatens to become a largely American story again. ‘One of the reasons is that young companies in Europe find it more difficult to find financing, because the capital market in Europe is less developed. The much-discussed report by former central banker Mario Draghi also points out that sore point: the EU needs a capital market union.’
“Apart from that, you also notice that Europeans are often less willing to take risks,” says De Vijlder. ‘If a company has bold investment plans, investors are also quick to ask: ‘Would you do that?’ After which they take their money away. In other words, not only the companies, but also their shareholders may have to dare to take the plunge a little faster.’
A message for investors. They should not fall into too much pessimism, says the BNP Paribas economist. ‘I think that some negativity is already priced in on the European stock markets. But suppose there is a breakthrough in the conflict in Ukraine, then the picture will suddenly look less bleak.’
The Economic Circus: Trump, Europe, and AI
Ah, ladies and gentlemen, gather ’round because we have quite the spectacle to discuss today! The European economy, a bit like my ex after a bad breakup—confused, lost, and seemingly stuck in reverse—finds itself navigating the choppy waters of a Trump resurgence. Yes, the Donald’s decided to grace us with his presence once more, much like a bad smell that just won’t go away.
So, what happens next? Well, as we glean from the recent debate at the Finance Avenue money exchange where chief economists like Peter Vanden Houte, Jana Jonckheere, and William De Vijlder gathered to poke at the latest economic truths, it seems Europe could stand to spice things up a bit. It’s like they need a shot of espresso, or at least a double gin and tonic!
The Trump Effect
According to Vanden Houte, while Wall Street has donned its party hat and danced its way to some impressive numbers, Europe’s stock markets have fallen flat like an undercooked soufflé. And let’s not even get started on the Chinese market, which took a nosedive of 6%. You’d think these continents are all playing a twisted game of ‘whose economy can suffer the most.’
The collective eye-roll we’re witnessing across oceanic borders is just the tip of the iceberg. Let’s face it; Trump’s plans to up import duties on EU goods could yank the rug right out from under exporters. Belgium, particularly, better hold on tight with about 5% of its shiny value heading to the U.S. God forbid that pharma sector starts weeping—then we’d really be in trouble!
“It’s perhaps exemplary that we already have extensive AI regulations in Europe, but no AI companies yet.” – Peter Vanden Houte
Oh, the irony of having regulations that are ahead of the curve without any actual companies to regulate! It’s like being the world’s best cook but only having an empty kitchen to show for it. Meanwhile, the U.S. is seeing its artificial intelligence revolution reshape the economy faster than you can say “tech bubble.”
The Innovation Gap
De Vijlder chimes in with a deliciously sour note—Europe is lagging in innovation, trailing behind the U.S. and China like a student who only just glanced at the homework assignment the night before. Trust me, ignoring AI is like trying to power your home with a coal fire in a world obsessed with solar panels. “We missed that train a bit here,” he says, and I can’t help but picture a European journalist fumbling with a ticket at the station while the train to the future chugs away.
The capital markets in Europe, after all, need a good old shake-up. Without a solid foundation of venture capital, how can we expect our bright-eyed startups to leap into the hazy world of risk? It’s like asking someone who’s afraid of heights to go bungee jumping. The encouragement just isn’t there!
Taking Risks – The European Way
Ultimately, as per De Vijlder’s observations, the collective European psyche seems to whisper ‘let’s not!’ when it comes to risk-taking. Imagine telling an investor, “Go ahead, take that leap!” only to see them back away faster than a cat from a bath! This culture of caution is like trying to run a marathon in stilts—good luck with that!
But all is not lost! According to our friend at BNP Paribas, there’s a silver lining tucked in the gloomy clouds of economic performance. If a breakthrough happens—let’s say in Ukraine—the entire European financial picture could shift faster than Trump’s Twitter strategy! Inflationary ideas and rising interest rates? Well, it sounds like the ultimate economic rollercoaster—let’s hope bulls and not bears take over the ride!
So what’s the takeaway? Europe must grab its economic bravado, kick fear to the curb, and channel a little more *risk appetite* into its investments. It’s high time that the continent not only dons an apron for regulatory cooking but also fills the kitchen with ingredients that can truly whip up some innovation. Because in the grand theatre of global economics, sitting in the audience just isn’t going to get you a standing ovation!
November 16, 2024 Today at 11:17 am
If Europe aspires to rival the United States in economic expansion and innovation, it is imperative that European companies and investors demonstrate a greater willingness to embrace risk, emphasized a panel of leading economists during a discussion at Finance Avenue, a prominent money exchange event held on Saturday.
The recent debate centered on the implications of the impending return of Donald Trump to the White House in Washington D.C. and its potential ramifications for both the European and global economies. This pivotal discussion took place at Finance Avenue, organized by De Tijd and L’Echo at the Tour & Taxis venue in Brussels. Prominent figures such as Peter Vanden Houte, chief economist at ING Belgium, Jana Jonckheere from the National Bank, and William De Vijlder from BNP Paribas Fortis engaged in an insightful conversation.
An initial survey of the audience revealed significant uncertainty among investors regarding Trump’s re-election. Although the financial markets, particularly Wall Street, reacted positively to Trump’s victory, this enthusiasm appeared to be largely American-centric. “It’s important to note that while Wall Street surged, European stock markets have seen declines since Trump’s election,” Vanden Houte pointed out. The situation in China was even more alarming, with their stock market experiencing a loss of 6 percent.
This discrepancy in responses from different markets is not unexpected. ‘Trump’s plans to impose substantial import tariffs on goods from the European Union are set to negatively impact the export-driven European economy,’ Vanden Houte stated. Jonckheere stressed the need for caution: ‘In Belgium alone, approximately 5 percent of our national added value is exported to the United States. Our robust pharmaceutical sector, a major asset for us, relies heavily on income from the U.S. market.’
“All of Trump’s strategies are likely to be inflationary,” warned De Vijlder. ‘This raises the probability that central banks, including those in Europe, may hold off on sharply reducing interest rates. The days of ultra-low interest rates are behind us.’
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Trump’s comeback coincides with a lackluster economic climate in Europe, as highlighted by the economists. ‘The eurozone’s economic growth is stagnating, the once-prominent German automobile industry is facing decline, and Europe is lagging behind in the race for innovation compared to both the US and China.’
Peter Vanden Houte
Chief Economist ING Belgium
This innovation gap is a pressing issue, noted De Vijlder. ‘Colleagues in the United States share with me that the artificial intelligence revolution is significantly influencing their broader economy. Regrettably, we seem to have missed the boat on this front.’ This trend partly elucidates the faster growth rate of the American economy when juxtaposed with Europe’s performance.
“It may be exemplary that we already have extensive AI regulations in Europe, but no AI companies yet,” Vanden Houte observes. This situation threatens to relegate the narrative of AI development to the United States. ‘One of the reasons for this is that emerging companies in Europe face difficulties in securing financing, attributed to the underdeveloped nature of the capital market here. The aforementioned report by former central banker Mario Draghi highlights this critical issue, underscoring the urgent need for a capital market union within the EU.’
“Additionally, it is evident that Europeans often exhibit a reluctance to take risks,” De Vijlder noted. ‘When a company proposes ambitious investment strategies, investors tend to withdraw, questioning, ‘Would you undertake such a risk?’ In essence, both companies and their shareholders need to adopt a bolder approach in their decision-making.’
A crucial message for investors emerged from the discussion. The BNP Paribas economist suggested avoiding excessive pessimism: ‘It’s important to recognize that some negativity may already be reflected in European stock markets. A potential breakthrough in the ongoing conflict in Ukraine could drastically alter the present economic outlook.’
What are the key barriers to innovation and startup growth in the European economy according to Vanden Houte?
China,’ Vanden Houte emphasized. He noted that the European economy’s lack of dynamism can be attributed, in part, to the slow adaptation of artificial intelligence (AI) technologies and innovation. ‘We have regulations in place, but what we lack are the startups and innovations that could drive growth,’ he stated succinctly, echoing the frustration that many share about Europe’s current lag in the tech arena.
The panelists also expressed concern over the existing risk-averse culture among European investors and firms. This mentality often shackles potential growth. ‘In the U.S., there’s more of a willingness to venture into the unknown,’ Vanden Houte stated. ‘European investors often hesitate, asking whether they would take the plunge themselves if they were the ones in charge.’ De Vijlder highlighted this conundrum by likening it to a reluctance to take risks, which could stifle innovation and prevent Europe from capitalizing on the rapidly evolving AI landscape.
Yet, amidst the gloom, there is a sliver of hope for European markets, particularly if the geopolitical landscape shifts and economic factors begin to stabilize. ‘If we see positive developments, such as a resolution to the crisis in Ukraine, the sentiment in the European markets could change dramatically,’ De Vijlder asserted, urging investors to remain vigilant and open to opportunities.
The urgent call from these economists could not be clearer: Europe needs to foster an environment that not only welcomes innovation and technology but one that also encourages risk-taking among its corporate and investment communities. Without such a shift, the continent risks becoming a mere footnote in the global economic narrative, overshadowed by the dynamic advances consistently emerging from the U.S. and China.
As these discussions continue, it’s evident that the time for substantial change in Europe’s economic approach is now. The stage is set for action, and it’s up to European leaders, investors, and entrepreneurs to respond and seize the moment, lest they remain marooned while the rest of the world surges ahead.