Panel
MI Summit 2013 - London: Reviving and Recapitalizing Europe
Milken InstituteAndrew Goldberg, Peter Guenter, Yann Le Pallec, Keith Savard, Howard Shore, Zak Summerscale, Jan Lepelik
- The European banking and political integration is expected to require many years, with some projections suggesting a timeframe of up to 200 years, though a shorter duration is considered likely.
- Economic growth forecasts indicate a 0.7% contraction in EU GDP at the end of the current year, followed by 0.8% growth in 2014 and only 1.3% in 2015.
- Corporate investment levels are anticipated to decline across the EU, including the UK, which may hinder sustainable recovery.
- Investors should prepare for new laws and fiscal policy steps designed to leverage the European Central Bank's crisis containment efforts.
- Continued austerity policies are expected to impact economic performance and patient access to innovation within a couple of years, while also threatening the European business model of major pharmaceutical companies.
- Structural adjustments are predicted to include Germany refloating the economy, reversing energy policies, restructuring labor markets, and Northern European economies shrinking the public sector and reducing taxes to address welfare dependency.
- Countries facing high debt and deficits are expected to face significant challenges in reconciling higher spending with their fiscal positions, potentially requiring Germany to eventually relax austerity and adopt pro-growth policies.
- Southern European nations are expected to lose competitiveness over time through internal deflation, though reliance solely on austerity is viewed as self-defeating.
- Specific concerns exist that Greece, Italy, and Spain cannot sustain current debt and unemployment levels without alternative solutions, possibly involving Greek debt restructuring and a mix of measures.
- Political and policy risks are expected to persist following German elections, alongside continued deleveraging and a disconnect between government rhetoric and budgetary support for the pharmaceutical sector.
- Long-term strategic focus is projected to shift toward the pharmaceutical industry 15 to 20 years out to compete with Chinese and Indian markets, alongside potential economic gains from unlocking value in chronic illnesses which currently cost up to 6.7% of GDP in some mature countries.
- The European funding model is expected to evolve from bank lending to a more diversified structure, with mid-sized companies increasingly utilizing the high-yield bond market and CLOs for SMEs, despite securitization currently being in early stages.
- Regulatory constraints on banks are expected to be revisited or relaxed within a two to five-year window to encourage lending, particularly once central banks establish a clear path toward normal monetary policy.
- Wage adjustments downward are considered necessary for countries unable to devalue, while the European economic union may face the eventual exit of some member states.