Monday

18th Jun 2018

EU recovery to slow this year

  • Moscovici: "The European economy continues to expand modestly" (Photo: European Commission)

The European economy will grow less than expected this year amid a "deteriorating international atmosphere", the European Commission has said.

In its Spring Forecasts published on Tuesday (3 May), the EU executive said the bloc will register a 1.8 percent growth of GDP in 2016, while the eurozone would grow by 1.6 percent.

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.

... our join as a group

The latest forecasts published in February were 1.9 percent and 1.7 percent, respectively.

In 2017, the commission said on Tuesday, the growth could be 1.9 percent in the EU and 1.8 percent in the eurozone. In February it said the growth would be 2 percent and 1.9 percent.

These figures were already down from previous forecasts in November.

"The European economy continues to expand modestly", EU commissioner for economic affairs Pierre Moscovici said at a press conference.

Less debt and deficit

Moscovici tried to strike a balance between bad news and good news.

On the positive side, Moscovici said that unemployment should continue to fall, although "too slowly in comparison to legitimate expectations in society".

The commission expects the unemployment rate to decrease from 9.4 percent in 2015 in the EU to 8.9 percent in 2016 and from 8.5 percent in 8.5 percent in 2017. In the eurozone, it would go down from 10.9 percent in 2015 to 10.3 percent in 2016 and to 9.9 percent in 2017.

The commissioner also noted that public deficit and debt will continue to decrease.

In the eurozone, the overall public deficit will be under 2 percent, at 1.9, against 2.1 percent in 2015. Only three countries - Greece, Spain and France - will have a deficit that exceeds the EU-authorised 3-percent bar.

On the negative side, in addition to the revised downwards forecasts, Moscovici said that inflation in the EU was expected "to remain negative in nearer term and remain very low for a longer period than previously forecasted".

After consumer prices remained stable in 2015, at 0.0 percent, they will increase by only 0.2 percent this year before taking off in 2017 with 1.4 percent.

By then, Moscovici said, "higher wages and steady demand growth should increase domestic price pressure".

While the commission still expects to see a positive impact of austerity policies and structural reforms inside the EU, the international environment remains a concern.

"The prospects for global growth have been less favourable" since the publication of the Winter Forecasts in February, Moscovici said, adding that global growth is at its slowest since 2009.

As a result, EU exports will continue to fall at least until the end of the year and investment is sill lagging behind normal levels.

Moscovici assured that the EU commission's €315-billion investment plan had "increasingly tangible results on private and public investment". But he said that EU countries should do more to prepare for the future.

He said that insisting on reducing public deficit and calling for more public sector investment where not contradictory.

"There is no schizophrenia," he said, adding that "if deficit contributed to growth, we would know it".

"Deficit and public debt are the enemy of investment," he said. "The more it costs to repay debts, the less room there is for productive spending. What counts is the quality of public spending".

'Reasoned optimism' on Greece

The commissioner drew a broad picture of the EU economy and refused to delve into specific cases, which he will present in the EU executive's recommendations to EU countries later this month.

Spain, where elections will take place on 26 June after an inconclusive vote in December, will be an interesting country to follow. It is expected to register one of the highest growth rates this year, on 2.6 percent, but will miss the 3-percent deficit target and could fall under an EU punitive procedure.

France, which will have presidential and parliamentary elections next year, is also expected to miss the target both this year and next year. But Moscovici, a former French finance minister, said EU compliance was "still doable" if the government managed its finances "very seriously".

In Greece, the commission expects negative growth this year, with -0.3 percent, but a recovery next year with a 2.7 percent growth. That will depend on the implementation of reforms asked by the country's creditors, Moscovici said.

A finance ministers’ meeting will take place on Monday (9 May) to validate an agreement still to be concluded between the Greek government and the quartet of lenders - the European Commission, the European Central Bank, the European Stability Mechanism and the International Monetary Fund.

The deal is needed to unblock a new tranche of financial aid.

While both sides agree on 99 percent of the main part of the deal, an additional request that Greece now adopts laws on future cuts in case its finances deteriorate in 2018 is blocking the discussion.

Moscovici said he had "reasonable optimism" that ministers will be able to rubber-stamp a deal on Monday.

Fragile EU growth at risk

The commission expects Europe's economic recovery to continue. But slowing Chinese growth, low oil prices and geopolitical tensions threaten to undermine progress.

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".

Greek bailout exit takes shape

At a meeting next week, eurozone finance ministers and the IMF are expected to agree on new cash, debt relief measures, and a monitoring mechanism to ensure that Greece can live without international aid for the first time since 2010.

Opinion

Eurozone needs institutional reform

Both the examples of Greece and Italy test the limits of a system with inherent weaknesses that feeds internal gaps, strengthens deficits and debts in the European South, and surpluses in the European North respectively.

Opinion

Europe could lose out in North Korean bonanza

South Korean businesses including Hyundai and Samsung are already scoping investment opportunities. Will North Korea become a 'new Vietnam' opportunity - or more like Myanmar, where slow Brussels policy-making meant EU exporters lost out.

News in Brief

  1. EU-Australia trade talks kick off in Brussels next month
  2. France and Germany moving closer to eurozone reform
  3. Merkel to meet Conte to find migration compromise
  4. Seehofer gives Merkel time to strike EU migration deal
  5. Schroeder and Sarkozy appear with Putin at World Cup
  6. Tennis champ and 'EU diplomat' claims immunity
  7. Italy threatens to ditch EU-Canada free trade deal
  8. EU institutions agree EU-wide rights for asylum seekers

Stakeholders' Highlights

  1. IPHRCivil society asks PACE to appoint Rapporteur to probe issue of political prisoners in Azerbaijan
  2. ACCASocial Mobility – How Can We Increase Opportunities Through Training and Education?
  3. Nordic Council of MinistersEnergy Solutions for a Greener Tomorrow
  4. UNICEFWhat Kind of Europe Do Children Want? Unicef & Eurochild Launch Survey on the Europe Kids Want
  5. Nordic Council of MinistersNordic Countries Take a Stand for Climate-Smart Energy Solutions
  6. Nordic Council of MinistersNordics Could Be First Carbon-Negative Region in World
  7. European Federation of Allergy and AirwaysLife Is Possible for Patients with Severe Asthma
  8. PKEE - Polish Energy AssociationCommon-Sense Approach Needed for EU Energy Reform
  9. Nordic Council of MinistersNordic Region to Lead in Developing and Rolling Out 5G Network
  10. Mission of China to the EUChina-EU Economic and Trade Relations Enjoy a Bright Future
  11. ACCAEmpowering Businesses to Engage with Sustainable Finance and the SDGs
  12. Nordic Council of MinistersCooperation in Nordic Electricity Market Considered World Class Model

Latest News

  1. Tear gas bodes ill for Greece-Macedonia name deal
  2. Asylum applications drop in EU, Germany registers most
  3. EU summit: migrants get a 'vote' too
  4. Basque threat of 'second front' for independence
  5. Progressive regulation needed now for 21st century finance
  6. Greece and Merkel's fate top This WEEK
  7. How Italy's government might hijack EU migration policy
  8. The EU cannot shape the future of AI with regulation

Stakeholders' Highlights

  1. FIFAGreen Stadiums at the 2018 Fifa World Cup
  2. Mission of China to the EUChina and EU Work Together to Promote Sustainable Development
  3. Counter BalanceEuropean Ombudsman Requests More Lending Transparency from European Investment Bank
  4. FIFARecycling at the FIFA World Cup in Russia
  5. Nordic Council of MinistersOECD Report: Gender Equality Boosts GDP Growth in Nordic Region
  6. Centre Maurits Coppieters“Peace and Reconciliation Is a Process That Takes Decades” Dr. Anthony Soares on #Brexit and Northern Ireland
  7. Mission of China to the EUMEPs Positive on China’s New Measures of Opening Up
  8. Macedonian Human Rights MovementOld White Men are Destroying Macedonia by Romanticizing Greece
  9. Counter BalanceControversial EIB-Backed Project Under Fire at European Parliament
  10. Nordic Council of MinistersIncome Inequality Increasing in Nordic Countries
  11. European Jewish CongressEU Leaders to Cease Contact with Mahmoud Abbas Until He Apologizes for Antisemitic Comments
  12. International Partnership for Human RightsAnnual Report celebrates organization’s tenth anniversary

Join EUobserver

Support quality EU news

Join us