Low labor productivity in Spain, Germany, France and Italy will increase their deficits, according to Natixis

In Spain it could exceed 7% in the next five years

MADRID, 24 Ago. (EUROPA PRESS) -

The trend of low labor productivity since 2017 in the four main economies of the European Union (EU), Germany, France, Spain and Italy, would cause an increase in the deficit in three of these economies and a loss of their wealth, according to an analysis of asset manager Natixis.

Specifically, if labor productivity continues to decline between 2023 and 2027, the public deficit (if there are no changes in fiscal policy) could increase by 3 percentage points of GDP in Spain, 2 percentage points in Germany, 3.6 points percentages in France and would remain unchanged in Italy.

Likewise, in the study, led by the director and senior economic advisor of Natixis, Patrick Artus, the firm has also sought to determine what loss of wealth, that is, of GDP, has been caused by low labor productivity since 2017 in these four countries.

And what shortfall in production, compared to the previous trend, should be expected by 2027 if labor productivity does not recover.

The analysis, therefore, finds that if the trend in labor productivity from 2010 to 2016 had continued from 2017 to the second quarter of 2023, the level of labor productivity in the second quarter of 2023 would be 6% higher in Spain, 8 % higher in Germany, 8% higher in France and unchanged for Italy.

Similarly, if one compares labor productivity growth, and therefore GDP growth for a given employment rate from 2023 to 2027 (first, extrapolating the observed trend from 2010 to 2016; and second, extrapolating the observed trend from 2017 to 2022) in the next five years the German deficit will stand at 5%, 8% in France, 7.5% in Spain, and will remain unchanged in Italy.

Public finances are highly dependent on the assumed growth of labor productivity, so if labor productivity increases or decreases from 2023 to 2027 as it did from 2010 to 2016, the fiscal deficit, unchanged, will be higher in 2027 in Germany. (2 points), Spain (3 points) and France (3.6 points), concludes the Natixis study.

Finally, it warns that a fiscal deficit increased by these percentages in 2027 would be "unsustainable" in Germany, France and Spain.