In January 2015, the decline of more than 60% in oil prices combined with historically low interest rates and the significant weakening of the euro (EUR) against the dollar (USD) provided Europe with a priori favorable conditions. The rare aggregation of these positive exogenous factors should have propelled the economic growth of the European countries to a much higher level than that finally recorded.
The “new mediocre” characterized by economic growth varying painfully from 0% to 1.3% embodied the failure of Europe to take advantage of the international momentum. Almost two years later, interest rates are on the rise again and the production cut agreement just signed at OPEC could sustainably boost oil prices.
These two developments constitute two very bad news for the excessively indebted European countries, particularly France and Italy, as one can easily imagine the serious difficulties they will have to finance – let’s not even think about repaying – their public debt. If growth was hovering over zero, while money was “gratis”, economic statistics should be even worse when the interest rate curve returns to pre-2008 financial crisis levels at around 2.9% according to the average ECB and Fed key rates.