The Eurozone’s major fiscal stimulus of the decade may arrive not with a common plan but rather through national initiatives

euro coins

The market has scarcely contemplated the possibility of a major fiscal stimulus in the Eurozone. However, the strategists at Morgan Stanley believe that, after two years marked by a restrictive fiscal policy, we could see the largest fiscal stimulus of the last decade, not through a common plan, but rather through national level initiatives, especially in Germany, France, Italy and Spain.

In concrete, the analysts expect a stimulus equivalent to +0.6% of GDP in 2019, which would amount to another supportive factor precisely at the moment of inflection in the European macroeconomy, which they believe will bounce back starting in the second quarter and through the whole second half of 2019. Assuming a multiplier of 0.6, they estimate that the expansionary fiscal measures could have a potential impact on growth of and additional +0.35%. In short, we see various supportive factors in Europe.

About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.