Where is the EU economy headed? The international dimension

Abstract

Since 2020, the EU economy has been hit by a number of external shocks that have had a major impact on growth, employment and inflation. As the outlook for the world remains highly uncertain, international conditions are likely to continue to affect the EU’s economic performance until a more stable equilibrium is reached. The question is in which direction and by how much? This article presents three possible scenarios (baseline, adverse, and benign), which provide some impact quantification through the use of the European Commission’s Global Multicountry model, and considers the potential implications of these scenarios on where the EU economy is headed. The final part of the article discusses how the EU, by better reconciling its domestic and foreign agenda, can play a more proactive role in determining international conditions, leading to more favourable equilibria.