Monday

19th Nov 2018

EU looking at long-term slow growth

  • Pierre Moscovici: "European growth will hold up in 2017 against a more challenging backdrop than in the spring" (Photo: European Commission)

"Modest growth in challenging times" with a pessimistic evaluation of future trends: the European Commission published on Wednesday (9 November) its Autumn Economic Forecasts under a very cautious headline.

Four months after the UK voted to leave the EU and on the day after the US elected Donald Trump as president, the EU executive revised upward its growth forecasts for this year but stressed global risks to the economy.

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

"European growth will hold up in 2017 against a more challenging backdrop than in the spring," EU finance commissioner Pierre Moscovici said at a press conference.

The commission expects the euro area's GDP to grow by 1.7 percent this year, compared to a 1.6 percent forecast in the previous report in May. For the whole EU, it said growth would be 1.8 percent this year, compared to a 1.6-percent expectation in May.

Moscovici stressed "five good news": the GDP is growing in all 28 countries, mainly thanks to private consumption; unemployment is expected to fall more than previously thought, from 10.1 percent in 2016 to 9.2 percent 2018; investment is on the rise; inflation will reach 1.4 percent in 2017, from 0.3 percent this year ; and the EU deficit is down, from 2 percent this year to 1.7 next year.

'Vicious circle'

The commission has revised its forecasts for next year.

It says growth will be 1.5 percent in the euro area and 1.6 percent in the whole EU, while it said in May that is would be respectively 1.8 percent and 1.9 percent.

"Risks have intensified in recent months, mainly in the wake of the UK ‘leave’ vote," it explains, adding that "risks have increased on the external side, in particular of a disorderly adjustment in China and aggravating geopolitical conflicts."

In a reference to Tuesday's US election, the commission also points out "potential adverse policy shifts … and the related uncertainty" that could have an impact on US and world growth.

It notes a "new backlash against globalisation", of which Brexit was a consequence, and that has an impact on potential growth.

It says that "the new backlash against globalisation may further dampen already slow international trade growth … has increased policy uncertainty that in turn is likely to dampen domestic demand."

In a more unusual note, the report warns of a longer term risk for the EU economy.

"As expectations of low growth ahead affect investment today, there is potential for a vicious circle," the commission's director general for economic and financial affairs writes in the report's foreword.

"In short, the projected pace of GDP growth may not be sufficient to prevent the cyclical impact of the crisis from becoming permanent (hysteresis), " Marco Buti writes, using a word that refers to a situation of economical crisis and high unemployment that remains after its cause has disappeared.

Differing growth

Looking at the current modest growth, the commission notes that it "differs substantially across member states."

"In some, GDP now stands more than 10% above its trough, having passed the pre-crisis level some time ago. In others, the expansion from the trough is still modest, and GDP remains so far lower than at the onset of the crisis," it says, suggesting a risk of growing inequalities in the EU.

Among member states, Spain, which spent ten months without a proper government, is expected to record the fastest growth, with 3.2 percent in 2016 and 2.3 percent in 2017. Romania with 5.9 and 3.9 percent will be the EU28 most growing economy.

But Spain is expected to be the only country to miss the 3-percent deficit target next year, from 4.6 percent this year to 3.8 percent in 2017, instead of a 3.1-percent target set by the EU. A budget proposal to be sent soon will show whether the new government thinks it can meet the target.



France, where a presidential and legislative elections will take place next year, is expected to meet the target, with 2.9 percent, before falling again in 2018 with 3.1-percent deficit.

In Italy, another country under scrutiny from the commission, the deficit is expected to remain at 2.4 percent in 2016 and 2017 although the government has promised to cut to 1.8 percent next year.

As for Britain, the commission notes a "healthy" 1.9-percent this year despite the vote to leave the EU, above the EU average. But for 2017, it says that growth will fall to 1 percent, and 1.2 percent in 2018, "as business react to current uncertainty" around the Brexit talks, Moscovici said.

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 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.

Italy defiant on budget on eve of EU deadline

Italy would be committing economic "suicide" if it fell in line with EU rules, its deputy leader has said, in a sign that Rome has little intention of bowing to pressure ahead of Tuesday's budget deadline.

Greek austerity violated right to health, says watchdog

Cuts in the Greek health care system, following the austerity cuts demanded in return for international bailouts, have violated the European Social Charter on the right to health, says Council of Europe's human rights commissioner, Dunja Mijatovic.

News in Brief

  1. Ireland extradites Polish man despite rule of law concerns
  2. Germany and France agree eurozone budget framework
  3. Austrian foreign minister: EU's Israel policy 'too strict'
  4. Soros and Kurz discuss Central European University move
  5. EU set to tighten rules on foreign strategic investment
  6. Macron repeats call for unified Europe in Bundestag speech
  7. US warns EU banks and firms against trading with Iran
  8. Merkel urged Romania not to move embassy to Jerusalem

Stakeholder

An open China brings opportunities to Europe

Some 60 years ago, the first major World Fair after World War II was held in Brussels. Sixty years on, China International Import Expo (CIIE), the first world expo dedicated to expanding imports, will open in Shanghai, China.

Stakeholders' Highlights

  1. NORDIC COUNCIL OF MINISTERSTheresa May: “We will not be turning our backs on the Nordic region”
  2. International Partnership for Human RightsOpen letter to Emmanuel Macron ahead of Uzbek president's visit
  3. International Partnership for Human RightsRaising key human rights concerns during visit of Turkmenistan's foreign minister
  4. NORDIC COUNCIL OF MINISTERSState of the Nordic Region presented in Brussels
  5. NORDIC COUNCIL OF MINISTERSThe vital bioeconomy. New issue of “Sustainable Growth the Nordic Way” out now
  6. NORDIC COUNCIL OF MINISTERSThe Nordic gender effect goes international
  7. NORDIC COUNCIL OF MINISTERSPaula Lehtomaki from Finland elected as the Council's first female Secretary General
  8. NORDIC COUNCIL OF MINISTERSNordic design sets the stage at COP24, running a competition for sustainable chairs.
  9. Counter BalanceIn Kenya, a motorway funded by the European Investment Bank runs over roadside dwellers
  10. ACCACompany Law Package: Making the Best of Digital and Cross Border Mobility,
  11. International Partnership for Human RightsCivil Society Worried About Shortcomings in EU-Kyrgyzstan Human Rights Dialogue
  12. UNESDAThe European Soft Drinks Industry Supports over 1.7 Million Jobs

Latest News

  1. Spain raises Gibraltar, as EU and UK talk post-2020 relationship
  2. Panic is not answer to EU's security challenges
  3. Dutch flesh out proposal for EU human rights sanctions
  4. EU cheerleaders go to Russia-occupied Ukraine
  5. EU must recognise new force for Balkans destabilisation
  6. Brexit dominates EU affairs This WEEK
  7. How the EU commission got tunnel vision on self-driving cars
  8. No-confidence calls against May put Brexit deal in doubt

Stakeholders' Highlights

  1. Mission of China to the EUJointly Building Belt and Road Initiative Leads to a Better Future for All
  2. International Partnership for Human RightsCivil society asks PACE to appoint Rapporteur to probe issue of political prisoners in Azerbaijan
  3. ACCASocial Mobility – How Can We Increase Opportunities Through Training and Education?
  4. Nordic Council of MinistersEnergy Solutions for a Greener Tomorrow
  5. UNICEFWhat Kind of Europe Do Children Want? Unicef & Eurochild Launch Survey on the Europe Kids Want
  6. Nordic Council of MinistersNordic Countries Take a Stand for Climate-Smart Energy Solutions
  7. Mission of China to the EUChina: Work Together for a Better Globalisation
  8. Nordic Council of MinistersNordics Could Be First Carbon-Negative Region in World
  9. European Federation of Allergy and AirwaysLife Is Possible for Patients with Severe Asthma
  10. PKEE - Polish Energy AssociationCommon-Sense Approach Needed for EU Energy Reform
  11. Nordic Council of MinistersNordic Region to Lead in Developing and Rolling Out 5G Network
  12. Mission of China to the EUChina-EU Economic and Trade Relations Enjoy a Bright Future

Join EUobserver

Support quality EU news

Join us