Wednesday

27th Jul 2016

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 to tweak rules on Chinese 'dumping'

The EU Commission has tried to fudge the issue of whether China is a “market economy” amid efforts to protect European industry from cheap exports.

Court ruling puts Renzi bank plan in doubt

EU court ruling on bank bailouts has raised the likelihood of a political embarrassment for Renzi, months before a referendum puts his future and, potentially, Italy’s euro future on the line.

Stakeholders' Highlights

  1. Belgrade Security ForumMigration, Security and Solidarity within Global Disorder: Academic Event 2016
  2. GoogleHow Google Fights Piracy: Creating Value While Fighting Piracy
  3. EJC"My Visit to Israel" - Opinion by MEP Lopez Aguilar, Chair of the EP Working Group on Antisemitism
  4. World VisionChildren Migrating, Out of School and at Work as Hunger Deepens in Southern Africa
  5. European Healthy Lifestyle AllianceStand-Up (and Exercise) to Prevent Chronic Diseases
  6. Centre Maurits CoppietersLaunches a Real-time News Hub Specialised in EU Stakeholders
  7. Dialogue PlatformFethullah Gulen Calls for International Probe Into Turkey Coup Allegations
  8. GoogleEU-US Privacy Shield: Restoring Faith in Data Flows and Transatlantic Relations
  9. World VisionWorld Leaders & Youth Advocates Launch Partnership to End Violence Vs. Children
  10. Counter BalanceReport: Institutionalised Corruption in Romania's Third Largest Company
  11. Access NowEuropol Supports Encryption. We Can Relax Now… Right?
  12. GoogleLearn about Google's projects across Europe on Twitter @GoogleBrussels