Bailed-out Greece, Ireland and Portugal have “shaped up fast,” with a swathe of “sweeping structural and fiscal reforms,” the bank said, suggesting that once the bloc returns to growth, it could be “the most dynamic of the major Western economies.”
Berenberg called for a swift resolution to the Greek crisis, a slowdown or stop to austerity and more pro-growth structural reform to give the best chance this optimistic projection comes true.
More than two percentage points of GDP in austerity in any one year is too rapid a pace for austerity, it said, claiming rapid cuts risked “death spirals” in Greece. “Europe needs to learn the lesson that fiscal shortfalls caused by an unexpectedly deep recession need to be tolerated and should not trigger further rounds of austerity.”
The bank also warned that France – “the only major European economy which is beset by serious health problems and has yet to do anything about it” – could stymie recovery hopes. It called for supply-side reform, attacking taxes both for harming incentives and depressing demand.
Overall in the report, Greece topped the adjustment progress table, followed by Ireland, Estonia, Spain and Portugal, while Luxembourg and Germany sat at the bottom of the league.