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Short Term Prospects for the European Economy: evaluating the current slowdown and the aftermath of the September 11th attack on the USA

Catherine Mathieu ()

Sciences Po publications from Sciences Po

Abstract: The September 11th attacks on the United States and the consequent combat against international terrorism have clouded the short-term outlook for the world economy. World economic growth had already slowed considerably from the final quarter of last year. This was in part the consequence of past monetary tightening in reaction to persistently high growth rates in the US and the impact of rising energy prices. A major impetus, however, came from the bursting of the high-tech investment bubble, accompanied by a marked fall in equity prices, generating a sudden world-wide decline in confidence. Leading indicators in late summer suggested that the bottom of the cycle might have been near, at least for the United States, although the accumulation of debt by the private sector and the related large current account deficit remained a serious risk to growth. The attacks of September 11 have altered this picture drastically. A further deepening of the international cyclical downturn in the remaining part of the year now seems unavoidable, while the previously expected recovery of the international economy will be delayed by at least one to two quarters into early 2002 (...).

Date: 2001-11
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