Dansk økonomi, forår 1996 - De Økonomiske Råd

ENGLISH SUMMARYChapter I: The International OutlookEconomic growth in the industrial countries slowed down in thesecond half of 1995. It is expected that the slowdown in the USAwill mark the beginning of a period of more stable growth afterseveral years of growth above the trend. In Europe the slowdownwas more pronounced than in the USA and it has continued into1996. Fiscal policy will not contribute to higher growth, as it isexpected to remain tight. However, lower interest rates and anappreciating dollar exchange rate are expected to lead to higherEuropean growth in the second half of 1996. The weak economicgrowth in the beginning of the year means that growth in theOECD area is expected to reach only PA per cent in 1996, whileit is expected to reach 2 X A per cent in 1997 and 2Vz per cent in1998. This moderate rate of growth is expected to result in lowinflation and a high rate of unemployment.During the past two decades many countries have accumulated alarge public debt. The accumulation of debt in the US has primarilybeen due to expansive fiscal policy, while European debtaccumulation can to a considerable extent be attributed to agrowing level of structural unemployment. The relatively high realinterest rates since 1980 have also contributed to the increase inpublic debt.The accumulation of public debt has reduced the room for fiscalmanoeuvre and made public financesmore sensitive to fluctuationsin interest rates. Furthermore, it has put upward pressure on theglobal real interest rate, and has also resulted in a reduction in theconsumption potential for future generations. A reduction of thepublic debt has a high priority in the economic policy of mostcountries. However, the high unemployment rates make it difficultto strengthen fiscal policy in Europe. Structural reforms, whichenhance the flexibility in labour and goods markets, can improvefiscal balances through a reduction of structural unemployment.163