”Peace talks have started. We do not know how soon or exactly where they will land. But things are moving fast. While much of the focus is, rightly, on the unexpectedly daunting geostrategic challenges, it’s not too soon to start mapping out the key economic implications for Europe. Overall, the implications should be positive both in the near and the longer term; how much will depend to a large extent on decisions Europe itself makes. In a nutshell, the ceasefire should boost GDP growth in the near term primarily through the demand channel, with scope for a long-term boost to potential output. The impact on inflation is more uncertain, as there are multiple drivers going in opposite directions, but overall more limited, and European currencies might benefit as well (dampening inflation). These impacts would be most pronounced on Central and Eastern European countries, and least pronounced on the UK, with Western Europe in between.“
Morten W. Langer
