The gap between American and European growth rates vanishes. But there is little evidence that the old countries can go ahead in the near future. During the past three years American investors have done a lot. Housebuilding and the service sector fully benefited by it, but many manufacturing activities, under pressure of competition, also gained in strength. Out from the big european countries, Germany alone strove to modernize accordingly and displays some optimism. Would the dollar fall be confirmed, the external constraint still imposed to several countries will be relieved, and consumption stimulated through reduced inflation. In return competition will increase, demand from developing countries will drop and there will be little ground left for exports. French growth, albeit more sustained next year, will still show signs of lagging. Consumption is drawn by tax cuts and a weakening saving propensity. Net borrowing will be narrowed with curtailed expenses of the central government and still low purchases of new dwellings by households. As for firms, debt funding and cautious investment will be carried on. A lower inflation and some linkage of financial and monetary markets will help the easing of interest rates. Trade gap could be reduced and long term foreign debt would stop growing.

Economic developments have been less spectacular in Europe than in the United States over the past two years, but have probably laid firmer foundations for sustained growth. Strict fiscal policies have indeed resulted in the beginnings of a decline in structural deficits but have also hindered growth thus leaving room for large increases in unemployment. Moreover, as monetary policies have remained tight, inflation rates have been substantially reduced despite the persistant rise of the dollar. Economic policies will probably remain cautious in the coming months although external factors should be less constraining. Growth, albeit moderate, will therefore continue in Europe whereas in the United States the slowdown will continue and could eventually turn into a mild recession. In France, output increased in 1984 thanks to agricultured production and buoyant exports. Domestic demand remained otherwise sluggish owing to restrictive fiscal and monetary policy. In contrast, over the coming 18 months, the various components of demand will grow at more comparable rates. Monetary policy will remain restrictive but private consumption should benefit from tax cuts. Corporate sector investment will increase although the improvement in profits will be less marked than in 1984. Growth in exports will be limited by the slowdown in the United States.

The tightening of monetary policy in industrialised countries from 1980 onwards is one of the causes of the subsequent slowdown in economic growth along with inflation and the reduction of international liquidity. This trend will continue in the near future. Despite a smooth reduction in the growth rate, the needs of the american economy in foreign capital will remain substantial. This drain on foreign savings is likely to hamper recovery elsewhere and maintain the strong dollar. Since the second oil shock, the underlying trend of growth has been 1 % p. a. higher in the US than in Europe as a whole and France in particular. The French economy, which was in phase with the rest of the EEC in 1983, shows signs of lagging. This should be more evident in 1985 than 1984 but insufficient to close the trade gap. There will be a gradual easing of economic policy in 1985. Consumer expenditure, which has been maintained over recent months only by a fall in the saving ratio, should pick up with the reduction of tax levels. Investment should continue to recover thanks to public funding and an improvement in profits but will be restricted to the modernisation of industry. With fewer jobs on offer and an increasing labour force, the rise in unemployment is unlikely to be stemmed.