Sunday

22nd Jan 2017

EU sneaks in bleak economic report

  • Commission: "It is urgent to strengthen the fundamentals of our economies" (Photo: europarl.europa.eu)

The European Commission waited until the end of the week to publish its annual "analysis of [EU] economic and social challenges,” in what looked like an attempt to keep the bad news quiet.

"The EU recovery remains fragile," admitted economic affairs commissioner Pierre Moscovici in a quote provided by the commission's press release.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

Looking at some of the 25 country reports published the commissioner could hardly be contradicted.

Greece and Cyprus don't get a report as they are under aid programmes, while it seems that Ireland's report was delayed due to a general election on Friday.

But looking at Spain, the commission said: "Low potential growth amplifies the risks related to macroeconomic imbalances.”

It also said "the high government debt remains a burden for the economy and a source of vulnerability” and that “private sector debt continues to decline but remains high, making the country vulnerable to shocks".

As Spain still has no governement two months after December elections, the commission notes that "no decisive measures have been taken to promote labour market participation, regional mobility, or to streamline minimum income schemes" and warns against further iaction.

A separate report noted that "structural weaknesses still hold back Italy’s capacity to grow and adjust to economic shocks".

"Italy is the source of potential spillovers to other Member States while external conditions affect its recovery. Its modest recovery and structural weaknesses adversely impact the European recovery and growth potential,” it said.

In France, "growth is expected to remain weak," in the long term and "the economic environment, characterised by a decline in potential growth and low inflation, complicates the reduction in public debt".

"The unemployment rate, at 10.5% in 2015, is not expected to decline in the short term," the report added.

“The recent wage moderation, in a context of low inflation and high unemployment, remains insufficient to regain competitiveness given the slowdown in productivity growth,” it said.

German surplus

On Portugal, which exited a financial aid programme in June 2014, the commission said that "the moderate recovery is set to continue, while risks stem from high fiscal imbalances and financial market volatility".

"The recovery of the Portuguese labour market continued in 2014 and 2015," the report noted, "but the absorption of the large pool of long-term unemployed remains a challenge".

In addition, "the low average skill level of the labour force is holding back productivity and competitiveness."

As for Germany, "the current account surplus has adverse implications for the economic performance of the euro area".

"Raising its growth potential would benefit Germany," the commission said.

"Moreover, given strong trade and financial linkages, it would also help sustain the recovery in the euro area amid the current demand shortfall. Instead, the weak domestic investment and dependence on external conditions pose risks to Germany,” it added.

The commission believes however that "Germany's solid fundamentals, including the robust labour market and the sound public finance position, provide a solid underpinning to build on in tackling" the challenge of integration of the hundred of thousands of refugees arriving in the country.

The country reports come a few weeks after the commission published its Winter Forecasts in which it revised downwards its growth expectations: 1.7 percent in 2016 and 1.9 percent in 2017. In November, the forecasts were 1.8 percent in 2016 and 1.9 percent in 2017.

'Effort is uneven'

On Friday, before the publication of the reports, a commission spokeswoman said they were "staff working documents, technical documents".

That is maybe why they were published when stock markets were closing for the weekend.

Their political significance were however outlined by the commission vice-president for the euro, Valdis Dombrovskis, in another quote provided in the press release.

"Against the background of growing external risks and increased volatility in financial markets, it is urgent to strengthen the fundamentals of our economies," he said.

"The commission's analysis shows that reforms are being carried out on a number of policy areas, but the effort is uneven. A number of member states still need to be more decisive in tackling persistent vulnerabilities, such as high public and private debt,” he added.

EU should raise own taxes, says report

A group chaired by former Italian PM and EU commissioner Mario Monti says Brexit should be used to create EU-level levies to depend less on member states contributions, and to abolish member states rebates in the EU budget.

Stakeholders' Highlights

  1. Caritas EuropaEU States to Join Pope Francis’s Appeal to Care for Migrant Children
  2. UNICEFNumber of Unaccompanied Children Arriving by sea to Italy Doubles in 2016
  3. Nordic Council of Ministers"Nordic Matters" Help Forge Closer Bonds Between the UK and the Nordic Region
  4. Computers, Privacy & Data ProtectionThe age of Intelligent Machines: join the Conference on 25-27 January 2017
  5. Martens CentreNo Better way to Lift Your Monday Blues Than to Gloss Over our Political Cartoons
  6. Dialogue PlatformThe Gulen Movement: An Islamic Response to Terror as a Global Challenge
  7. European Free AllianceMinority Rights and Autonomy are a European Normality
  8. Swedish EnterprisesHow to Create EU Competitiveness Post-Brexit? Seminar on January 24th
  9. European Jewish CongressSchulz to be Awarded the European Medal for Tolerance for his Stand Against Populism
  10. Nordic Council of Ministers"Adventures in Moominland" Kick Off Nordic Matters Festival in London
  11. PLATO15 Fully-Funded PhDs Across Europe on the Post-Crisis Legitimacy of the EU - Apply Now!
  12. Dialogue PlatformInterview: Fethullah Gulen Condemns Assassination of Russian Ambassador to Turkey