Friday

22nd Sep 2023

EU economic growth is coming to a 'stand-still'

There will be no double-dip recession but EU economic growth is coming to a "stand-still" the European Commission has warned, amid bleak news on the US recovery and world trade.

"GDP growth is now expected to remain subdued in the second half of the year, coming close to stand-still at year-end" the commission's interim economic forecast said on Thursday (15 September). The EU economy as a whole is expected to grow just 0.2 percent in the third and fourth quarers, while the eurozone is to grow by just 0.2 percent and 0.1 percent, respectively.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

  • The two engines of growth, exports and domestic demand, are in trouble (Photo: European Commission)

The expectations for the second half of the year have been ratcheted down "considerably" - by half a percentage point - from the bloc’s spring forecast.

The situation looks better from a full-year perspective, where a positive first quarter will see the EU economy grow 1.7 percent and the eurozone 1.6 percent in 2011 as a whole.

Unlike the fully-fledged spring and autumn reports, Thursday's interim report assesses only the performance of the seven largest EU economies. The figures in the interim paper point to downward revisions across all seven, meaning there is a "common factor" dragging the economies down.

The two best performers, Germany and Poland, will see overall 2011 growth of 2.9 percent and 4.0 percent, respectively. The two worst, Spain and Italy, are to see just 0.8 percent and 0.7 percent.

The two engines of growth, exports and domestic demand, are in trouble: net exports are becoming "less dynamic" the paper fears, while demand will be weakened in the second half of the year "and possibly beyond".

The report places the blame for the downward revision on "a more extensive weakening of global demand and world trade". The recovery "lost steam" in the US, the report said, while indicators for world trade suggest a further weakening in the third quarter. The EU study also pointed to a decline in financial market conditions "on the back of contagion of the sovereign debt concerns in the euro area" and concerns over the US.

"The outlook for the European economy has deteriorated. Recoveries from financial crises are often slow and bumpy", EU economy chief Olli Rehn said, announcing the results.

He added that a lot of austerity measures are still to kick in and when they do, the demand side of the equation will be hit even harder.

He called for EU countries to "steadfastly" stick to the existing strategy, however, saying: "To get the recovery back on track, it is crucial to safeguard financial stability and put budgets on a path that is sustainable beyond doubt".

Asked whether other strategies, involving fiscal stimulus, might be considered, he argued that high levels of public spending caused the market turbulence in the first place.

"Due to the still elevated levels of public debt and the related stress in financial markets, which is now leading to deterioration of economic growth, it has already had a very negative impact on economic recovery and sustainable growth", he said.

Mentioning Spain, he added: "Considering the stress of health of public finances, it would certainly be counterproductive to engage with fiscal stimulus at this juncture".

Slight change in language

The economy chief's message contained a slight nuance compared to previous statements.

Rehn is now calling for a "differentiated" austerity strategy, meaning that core eurozone countries like Germany which are under less pressure from markets, should not cut back any more on welfare programmes, unemployment payments and other forms of social assistance.

The slight change in message from the previous one of pure austerity first appeared in the commissioner’s language on Tuesday.

European markets tumble amid fears on global growth

European markets had their biggest fall since March 2009 on Thursday amid concerns over the state of the global economy and the ability of the eurozone to deal with its debt crisis.

Brussels calls for still more austerity

Most states have slashed tens of billions from their public spending plans already, but this may not be enough according to an annual report from the EU executive.

Mass strikes, protests hit Italy, Spain over EU-imposed austerity

Popular anger over Europe’s strategy of austerity for exiting the eurozone crisis spread to Italy on Tuesday as the country was paralysed by a general strike. Hundreds of thousands of ordinary Italians poured into the streets of over a hundred cities and towns to protest what Brussels, Frankfurt and Berlin demand.

Eurozone recession looming, as debt costs soar

Economic growth in the eurozone is slowing down, with the Netherlands and Cyprus heading back into recession, fresh quarterly statistics show. Meanwhile, traders are increasingly dumping even triple-A rated bonds, while Italy's borrowing costs are still in the red zone.

EU finance chiefs cool on Geithner plan for eurozone

A unprecedented visit by US treasury secretary Timothy Geithner to a meeting of European finance ministers in Poland was coolly received by the gathered European economy chiefs, while the meeting itself saw little advance made on how the eurozone can deal with its ever-deteriorating debt crisis.

Autumn forecast: EU economy in ‘dangerous territory’

Europe’s economy has deteriorated dramatically since the spring and growth has come to a standstill, the European Commission said on Thursday, warning that the bloc could very easily slip back into recession should “any further bad news” materialise.

Latest News

  1. Report: Tax richest 0.5%, raise €213bn for EU coffers
  2. EU aid for Africa risks violating spending rules, Oxfam says
  3. Activists push €40bn fossil subsidies into Dutch-election spotlight
  4. Europe must Trump-proof its Ukraine arms supplies
  5. Antifascism and fascism are opposites, whatever elites say
  6. MEPs back Germany's Buch to lead ECB supervisory arm
  7. Russia to blame for Azerbaijan attack, EU says
  8. Fresh dispute may delay EU-wide migration reforms

Stakeholders' Highlights

  1. International Medical Devices Regulators Forum (IMDRF)Join regulators, industry & healthcare experts at the 24th IMDRF session, September 25-26, Berlin. Register by 20 Sept to join in person or online.
  2. UNOPSUNOPS begins works under EU-funded project to repair schools in Ukraine
  3. Georgia Ministry of Foreign AffairsGeorgia effectively prevents sanctions evasion against Russia – confirm EU, UK, USA
  4. International Medical Devices Regulators Forum (IMDRF)Join regulators & industry experts at the 24th IMDRF session- Berlin September 25-26. Register early for discounted hotel rates
  5. Nordic Council of MinistersGlobal interest in the new Nordic Nutrition Recommendations – here are the speakers for the launch
  6. Nordic Council of Ministers20 June: Launch of the new Nordic Nutrition Recommendations

Stakeholders' Highlights

  1. International Sustainable Finance CentreJoin CEE Sustainable Finance Summit, 15 – 19 May 2023, high-level event for finance & business
  2. ICLEISeven actionable measures to make food procurement in Europe more sustainable
  3. World BankWorld Bank Report Highlights Role of Human Development for a Successful Green Transition in Europe
  4. Nordic Council of MinistersNordic summit to step up the fight against food loss and waste
  5. Nordic Council of MinistersThink-tank: Strengthen co-operation around tech giants’ influence in the Nordics
  6. EFBWWEFBWW calls for the EC to stop exploitation in subcontracting chains

Join EUobserver

Support quality EU news

Join us