Our Window on a Wary Europe - 2019 National Outlooks of Western Euro

Each year at this time we publish national business outlooks from our members. This is the first of two European summaries. Links to the individual country outlooks are at the end”

Most of Europe has the jitters. Since this time last year, the rock and the hard place have become up front and ugly – Brexit over here and Trump-vs-Jinping over there. Neither a cause for celebration if you are a business or political leader in the middle.

Of the 12 business outlook reports from our members in Western Europe it’s hard to qualify any as optimistic. It seems everyone is either heading into a train wreck (today’s name for Brexit) or shaking one off (see Spain and the Catalans). We will also be looking at another 10 outlooks from Eastern Europe.

Let’s start with the UK, where the “mother of Parliaments” has been rebranded by the Economist as the “mother of all messes”. Deceitful campaigning and political incompetence threaten to leave this former world leader in a shambles. As our member in London points out, economic considerations have been drowned out in the noise but, he says, they may not be quite as bad as it looks.

However, fall-out from the Brexit mess is widespread. Take Belgium. Modest GDP growth of 1.5% is seen for 2019 but who knows? According to Deloitte, Brexit could be a killer here. Exports to the UK are 9% of the national total and the country ranks 4^th of 27 EU countries in economic risk arising from Brexit.

Germans are not sleeping any better. A nation heavily dependent on free trade gets a collective migraine thinking about US auto tariffs and President Trump. It is no reassurance having a coalition government right now where the conservative CDU and the populist SPD can hardly talk to each other.

Austria is also unsettled by Germany’s uncertain future while worrying about its own. Growth is expected to slip from 2.1% to 1.9% in the second half of 2019. China and US trade policies are a big concern and Austria’s highly developed banking sector is undergoing significant change among the leadership teams.

Growth has been strong in Spain, but the after-shocks of government corruption and the Catalan secession have dampened the outlook. GDP growth of 2.6% is expected to slip to 2.1% for the next couple of years and Banco de Espana has estimated losses from the Catalan crisis at 30 billion euros.

Switzerland? Even here the skies are grey. The image of a self-dependent, business-friendly country is taking a hit from “a fog of uncertainty” at the global level and rising anti-immigrant sentiments. They are coming off a good year with 2.7% GDP growth but it’s expected to slow down in 2019 and beyond.

The Netherlands is doing well enough for the government to introduce measures to leave more money in the pockets of wage earners. It has also set aside over 90 million Euros as a Brexit-response fund to increase capacity at customs and the product safety authority.

Europe’s two jewels, Italy and Greece, have more than enough to commiserate with each other.

Our member at Cornerstone Roma anticipates growth of maybe 1% and had this to say:

“Italy is suffering an unusual Government coalition that looks quite unstable and is apparently unfit to face key issues such as migrants, terrorism, environment, unemployment.”

Ouch. But a rosy picture compared to that across the Ionian Sea. Our colleague in Athens tells us that unemployment is still above 20%, taxes and social security swallow 60% of an individual’s income and corporate taxes and levies amount to 81% of profit distribution.

It’s hard to get by just upon a smile.

Unless you are lucky enough to live in Denmark.

The Danes can smile with a strong economy, steady growth and unemployment at a low 3.9% But, of course, this is 2019 and there are issues. One is a recruiting challenge due to the acute shortage of qualified workers both in Denmark and the EU. And then, of course, there’s always Brexit.

Denmark’s is a very open economy, very dependent on exports primarily within the EU (61%). The UK takes up 8.1%. About 60,000 jobs are supposed to be affected by a hard Brexit and the IMF expects that Denmark is one of the countries which is affected most when Great Britain leaves EU.

In our next post we’ll look at Eastern Europe where we have a new hurdle – Russian sanctions.

Read more details of each country’s outlook for 2019: