Eurozone outlook, Brexit and energy sector's future are Europe's key risks
PI Exclusive Report 2016-02-16Who took part in the panel
| What if Britain leaves the EU? | Agata Gostyńska-Jakubowska, Research Fellow, Centre for European Reform, London |
|---|---|
| Will the eurozone lose steam? | Zsolt Darvas, Senior Fellow, Bruegel, Brussels |
Where are the European utilities heading? |
Stephan Lehrke, Managing Director, Boston Consulting Group, Berlin |
Key Points
Darvas: Germany will not be the engine of growth. Zsolt Darvas from the Brussels Bruegel think tank drew attention to the fact that the potential economic growth rate of our Western neighbour will amount to only 1.2-1.3 per cent in the next few years. This results from exhausting the possibilities to transfer the production to the cheaper countries, such as Poland, and the low productivity of the ICT sector. As for the south of Europe, the situation in Greece is improving, it has implemented more than 90 per cent of the imposed reforms and is beginning to pick up. He believes Italy will be facing the biggest threat - if the reforms do not increase productivity, the country is heading for the debt crisis.
Darvas: Populism is the major risk factor. The biggest threats to the eurozone economy are: • populism, which can lead to irresponsible policy, • Brexit and • a collapse of the Schengen Area. The collapse of the Schengen zone will not cause the collapse of the European Union - Darvas is of the opinion that it will result in only a slight increase of the transport costs. Raising the interest rates by the US Federal Reserve will have a positive influence on the eurozone economy through weakening the euro, thus helping the European exports. The economist also believes that the regulations within the banking union are a successful tool to recede the risk of another banking crisis in Europe.
Gostyńska: Only social benefits are important in the British referendum campaign. According to Agata Gostyńska-Jakubowska from CER, the content of the London - Brussels agreement will not have a decisive impact on the outcome of the referendum on the Great Britain's exit from the EU. The average Briton is not interested in such solutions as strengthening the national parliaments' role. Instead, the regulations concerning the social assistance for the newcomers to the UK will be important in the campaign. In turn, the British politicians deem it essential to gain a real influence on the decisions taken in the eurozone or the banking union, which Prime Minister David Cameron is unlikely to win in the negotiations.
Gostyńska: Risky alliance of Warsaw and London. If Poland's No. 2 commercial partner were to exit the EU, apart from the economic consequences, Poland would also incur political costs. It would lose an ally in favour of reducing barriers on the internal market, especially in the sector of services. Also PiS, cooperating with David Cameron's party in the European Conservatives and Reformists faction in EurParl, would have to pay a political cost. If the United Kingdom remains in the EU, Warsaw will continue to work with London - especially in the area of defending the interests of the countries remaining outside the eurozone.
Lehrke: Twilight of traditional energy. The managing director of BCG in Berlin, Stephan Lehrke, argued that a sharp increase of electricity installed in renewable energy sources (RES) resulted in lowering the energy prices in Europe. They push the conventional power plants out of the market. The biggest loss has been noted by the large companies that are trying to survive by cutting costs, laying off employees and releasing from their capital groups the companies with loss bringing assets - RES also force changes in the energy distribution segment - it needs investment in smart grids facilitating an easier integration of the unstable RES.
Lehrke: A debate on the construction of the power market - ahead. According to Lehrke, the Polish energy companies (due to the low level of the domestic energy market's integration with the rest of Europe) do not yet experience the problems faced by the companies in the West. The appearance of such problems, however, is only a matter of time. Therefore, there is a necessity to come up with a way to integrate the unstable renewable energy sources with the rest of the energy market. In the coming years, Europe and Poland will not avoid a discussion on building the power market, that is, the support system for the plants whose operation is essential for the safety of the energy system. 
Joanna Popielawska, Maciej Stefański contributed to this analysis.
