19th Mar 2018

Fragile EU growth at risk

  • Moscovici: "Euphoria would not be justified". (Photo: European Commission)

The EU economy will enter a fourth consecutive year of growth this year, but recovery could still be jeopardised by global and internal factors, the European Commission said Thursday (4 February).

According to the commission's Winter Economic Forecasts, the EU economy should grow by 1.9 percent in 2016 and 2 percent in 2017. This is slightly less than the previous forecasts, published in November, when the expectation was for 2 percent in 2016 and 2.1 percent in 2017.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

For the eurozone, the commission expects 1.7 percent growth in 2016 after 1.5 in 2015, and 1.9 percent in 2017. In November, the forecasts were 1.6 percent in 2015, 1.8 percent in 2016 and 1.9 percent in 2017.

"The European economy is successfully weathering new challenges this winter, supported by cheap oil, the euro rate and low interest rates," economic affairs commissioner Pierre Moscovici said at a press conference.

But he warned against "euphoria, which would not be justified" and listed the "crosswinds" that could slow the positive trend: a Chinese slowdown, uncertainties on future oil prices, geopolitical tensions, and "policy uncertainties inside Europe".

Growth engines

Moscovici did not include the migration crisis, nor uncertainties over the UK's EU membership in the challenges to the European economy.

The commission's analysis is that migration and spending linked to the arrival of migrants are "rather supportive of growth", he said. As for the UK question, Moscovici said the commission did not include it in its calculation because it is "working to keep the UK in the EU" and that progress is being made.

The commissioner, however, pointed out that "there is a high cost for our economies if Schengen was at risk". "Breaking Schengen would be a political and economical mistake," he said.

In this environment, almost all EU countries will grow, although at different paces according to their debt levels, positions in the economic cycle or exposure to global trade.

The EU growth engines will be Poland, with an expected 3.5 percent growth, Spain (2.5 percent), as well as the UK and the Netherlands (2.1 percent). Germany will be below the EU average, with a forecast growth of 1.8 percent.

Among smaller countries, Ireland, with 4.5 percent, and Romania (4.2 percent) should record the highest growth rates in the EU.

With a forecasted recession of -0.7 percent, Greece is expected to do better than previously thought. The Autumn forecast was of a -1.3 percent dip.

Moscovici said that while he was confident Greece would "avoid a relapse", the "key to everything" was the implementation of reforms under the bailout programme, in particular the pension reform.

In the commission's sight

France, Italy, Spain and Portugal will also remain under commission scrutiny.

"If no new measures are taken, [France's] deficit target for 2017 won't be reached," Moscovici said, adding that France's partners would not accept a new delay to reduce the deficit under 3 percent of PIB.

The commissioner said that he expected "serenity, patience and capacity for dialogue" from the Italian side, expressing his irritation by ending with the phrase "tutto chiaro?" ("all clear?").

Italy will stay under the 3 percent bar, but will remain hindered by "high unemployment and limited labour costs". And while Italian prime minister Matteo Renzi had been fighting with the commission on fiscal flexibility, Moscovici reminded him that Italy already benefited from it.

Although Spain will record one of the strongest growth rates, "downside risks to the growth forecast stem mainly from the uncertainty surrounding the formation of the new government," the commission says in its report.

To meet its deficit targets in 2017, the future Spanish government "will necessarily have to take measures," Moscovici said.

In Portugal, the new leftist government, which vowed to ease austerity policies, recently presented its budget to the commission. After discussion which is still ongoing, the commission will meet Friday afternoon (5 February) to give its assessment.

"Everything must be done so that the budgetary plan respects the stability and growth pact," Moscovici said.

As a consequence of the upward trend, unemployment is expected to decrease, from 11 percent of the active population in the eurozone, and 9.5 percent in the whole EU, in 2015, to 10.2 percent and 8.7 percent in 2017, respectively.


The last point of concern is the level of investment.

"Investment has so far failed to emerge as a strong driver of the ongoing recovery," the commission says.

The EU executive, which expects the Juncker investment plan to "start to have a positive impact on public and private investment", also says investment will "gradually pick up" with increased demand, a rise in capacity utilisation rates and improvement in profit margins.

"Member states with fiscal space should try to increase public investment," Moscovici said, in a reference to Germany, one of the two EU countries, along with Estonia, expected to run a budget surplus this year.

"Member states that still need to reduce their deficit should pursue a more growth friendly composition of expenditures," the commissioner added.

And "all member states should step up reforms that lift obstacles to private investment, he concluded. "We need to use all available tools to increase Europe's growth potential and to ensure a sustainable recovery."

EU to warn Spain on political deadlock

'The difficulties of forming a government could slow down the agenda of reforms,' the Commission says in draft document, as coalition talks inch forward.

Europe’s battered economy in moderate recovery

Most EU states will post modest growth in coming years, the Commission predicts. But Greece will continue to struggle, while France, Portugal, and Spain could fall foul of EU rules.

EU sneaks in bleak economic report

Annual country reports published Friday afternoon by the European Commission highlight challenges ahead for the EU economy.

EU looking at long-term slow growth

The European Commission's latest economic forecasts warn of period of global risks and possibility of a "vicious circle".

EU recovery to slow this year

On just 1.8 percent growth, the commission's forecast is less optimistic than before because of an instable global economy and lack of results of EU reforms.

VW dismisses complaints on Dieselgate fix

'I think customers who want to get information (...) are able to receive information if they want," VW management board member Hiltrud Werner told EUobserver. Consumer groups disagree.

News in Brief

  1. Sweden emerges as possible US-North Korean summit host
  2. Google accused of paying academics backing its policies
  3. New interior minister: 'Islam doesn't belong to Germany'
  4. Hamburg 'dieselgate' driver wins case to get new VW car
  5. Slovak deputy PM asked to form new government
  6. US, Germany, France condemn 'assault on UK sovereignty'
  7. MEPs accept Amsterdam as seat for EU medicines agency
  8. Auditors: EU farm 'simplification' made subsidies more complex

Stakeholders' Highlights

  1. Counter BalanceConmtroversial Turkish Azerbaijani Gas Pipeline Gets Major EU Loan
  2. World VisionSyria’s Children ‘At Risk of Never Fully Recovering', New Study Finds
  3. Macedonian Human Rights MovementMeets with US Congress Member to Denounce Anti-Macedonian Name Negotiations
  4. Martens CentreEuropean Defence Union: Time to Aim High?
  5. UNESDAWatch UNESDA’s President Toast Its 60th Anniversary Year
  6. AJC Transatlantic InstituteAJC Condemns MEP Ana Gomes’s Anti-Semitic Remark, Calls for Disciplinary Action
  7. EPSUEU Commissioners Deny 9.8 Million Workers Legal Minimum Standards on Information Rights
  8. ACCAAppropriate Risk Management is Crucial for Effective Strategic Leadership
  9. EPSUWill the Circular Economy be an Economy With no Workers?
  10. European Jewish CongressThe 2018 European Medal of Tolerance Goes to Prince Albert II of Monaco
  11. FiscalNoteGlobal Policy Trends: What to Watch in 2018
  12. Human Rights and Democracy NetworkPromoting Human Rights and Democracy in the Next Eu Multiannual Financial Framework

Latest News

  1. Brexit and trade will top This WEEK
  2. Dutch MPs in plan to shut EU website on Russian propaganda
  3. Four years on – but we will not forget illegally-occupied Crimea
  4. Evacuated women from Libya arrive newly-pregnant
  5. Merkel in Paris for eurozone reform talks
  6. Commission rejects ombudsman criticism over Barroso case
  7. Western allies back UK amid Russian media blitz
  8. Meet the European Parliament's twittersphere

Stakeholders' Highlights

  1. Mission of China to the EUDigital Cooperation a Priority for China-EU Relations
  2. ECTACompetition must prevail in the quest for telecoms investment
  3. European Friends of ArmeniaTaking Stock of 30 Years of EU Policy on the Nagorno-Karabakh Conflict: How Can the EU Contribute to Peace?
  4. ILGA EuropeCongratulations Finland!
  5. EUobserverNow Hiring! Sales Associate With 2+ Years Experience
  6. EUobserverNow Hiring! Finance Officer With Accounting Degree or Experience
  7. UNICEFCyclone Season Looms Over 720,000 Rohingya Children in Myanmar & Bangladesh
  8. European Gaming & Betting AssociationEU Court: EU Commission Correct to Issue Guidelines for Online Gambling Services
  9. Mission of China to the EUChina Hopes for More Exchanges With Nordic, Baltic Countries
  10. Macedonian Human Rights MovementCondemns Facebook for Actively Promoting Anti-Macedonian Racism
  11. Nordic Council of MinistersGlobal Seed Vault: Gene Banks Gather to Celebrate 1 Million Seed Collections
  12. CECEIndustry Stakeholders Are Ready to Take the Lead in Digital Construction