Wednesday

17th Jul 2019

Magazine

Big pain for small gain in the eurozone

  • Rehn: No turning back from austerity (Photo: ec.europa.eu)

The past year was better than 2012, at least as far as the eurozone economy is concerned, but not much better.

First, the good news. Europe came out of its double-dip recession, even if the 0.2 percent growth it saw in the first nine months of 2013 was just the tip of a green bud.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

  • Spaniards are five times more likely to be unemployed than Germans or Austrians (Photo: Valentina Pop)

The four countries which started the year under some form of bailout - Greece, Ireland, Portugal and Spain - all made progress. After six straight years of recession, the bloc's pre-eminent crisis country, Greece, may just break even in 2014.

Ireland and Spain both returned to growth and are on the verge of exiting their government and bank bailout programmes - signs that the worst is probably over.

There were also signs that countries in the southern periphery are moving towards an export-led economic model. The average budget deficit is down to around 4 percent, while the eurozone recorded a trade surplus of €109.6 billion with the rest of the world between January and September, up from €50.2 billion last year.

Even if the eurozone recovery is slight, for Olli Rehn, the EU's hawkish economic affairs commissioner, it is proof that austerity works.

But there is plenty of bad news as well.

Cyprus became the latest to receive a bailout in March.

At a fraction above 12 percent, eurozone unemployment is higher than a year ago. So are debt-to-GDP ratios. Access to finance, particularly in the countries most in need of credit, is still as tight as ever for businesses.

Meanwhile, the trade surplus figures carry a sting in the tail.

Most of the extra surplus is the result of falling consumption rather than higher export levels, proving that Europeans are more austere, but not necessarily making and selling much more than before.

If anything, the figures indicate that the economic gap between EU countries is widening. Spaniards, Greeks and Portuguese are now five times more likely to be unemployed than Germans or Austrians.

Mass unemployment, particularly among young Europeans, but also the rapidly growing number of long-term unemployed, is becoming a structural problem.

The year also saw the European Commission wield its new economic governance powers. Finance ministers must now submit their draft budgets to Brussels at the same time as national parliaments.

At a meeting in November, no minister was sent back to the drawing board, but Italy and Spain were the biggest countries to be put on a "watch-list" and warned that their budget plans have left them with little wriggle room.

The EU executive also tweaked the nose of France, with Rehn repeatedly telling Paris to liberalise its labour market and pension system.

Rehn caused even more controversy in November, when he told Germany he would investigate whether the country's trade surplus, worth around 7 percent of its GDP, is hurting other eurozone economies.

All things being equal, the eurozone will continue its slow recovery in 2014. But with no sign that EU decision makers are going to reverse austerity, more pain for small gains will be the order of the day.

This story was originally published in EUobserver's 2013 Europe in Review Magazine.

Click here to read previous editions of Europe in Review magazines.

New EU parliament term begins This WEEK

The 'top job' debate returns on Sunday with a special EU summit, followed by the first session of the new European Parliament. If leaders fail to solve the 'jobs puzzle', MEPs may feel force to choose their parliament president unilaterally.

Deja vu as EU top jobs dominate again This WEEK

Brussels will host yet another summit on Sunday (30 June) as leaders from across the 28 EU member states return, after Thursday's failed initial bid to nominate people to take on the presidencies of the major EU institutions.

Analysis

What did we learn from the von der Leyen vote?

The vote on von der Leyen showed the fundamental change in EU politics. The rise of the European Parliament, the power of political parties, and the fragmentation of politics, are new realities to be taken into account.

Stakeholders' Highlights

  1. UNESDAUNESDA reduces added sugars 11.9% between 2015-2017
  2. International Partnership for Human RightsEU-Uzbekistan Human Rights Dialogue: EU to raise key fundamental rights issues
  3. Nordic Council of MinistersNo evidence that social media are harmful to young people
  4. Nordic Council of MinistersCanada to host the joint Nordic cultural initiative 2021
  5. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  6. Nordic Council of MinistersEducation gets refugees into work
  7. Counter BalanceSign the petition to help reform the EU’s Bank
  8. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  9. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  10. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  11. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  12. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North

Latest News

  1. PiS & Fidesz claim credit for von der Leyen victory
  2. Von der Leyen faces gender battle for commission posts
  3. EU proposes yearly rule-of-law 'reviews'
  4. Poland 'optimistic' despite new EU law checks
  5. What did we learn from the von der Leyen vote?
  6. Is Golden Dawn's MEP head of a criminal organisation?
  7. Finland rejects call to end sponsorship of EU presidency
  8. MH17 five years on: when will Russia be punished?

Join EUobserver

Support quality EU news

Join us