The euro zone is currently benefiting from the fall in the oil price, the depreciation of the euro, very low interest rates and the postponement of budgetary adjustments. Euro-zone growth will therefore be decent in 2015- 2016, and an upturn in household demand is already visible. Moreover, corporate profitability is high. So it is difficult to understand why corporate investment is showing no sign of recovery. What possible explanations are there for investment’s continued stagnation?
A lack of improvement in the situation of industry, under the effect of a persistent competitiveness problem, despite the euro’s depreciation, and problems in the diffusion of new technologies; both problems are indeed present;
The persistence of sufficient capacity underutilisation so as to absorb the rise in consumption; yet the amount of slack is minor; The perception among euro-zone companies that the boost to demand provided by the lower oil prices is only temporary;
A structural pessimism or fear of making irreversible decisions among euro-zone companies, as reflected by several indicators, especially in industry. The absence of a recovery in corporate investment in the euro zone – if it continues – is bad news: there would be no upturn in potential growth, and it would reveal structural problems.
