Friday

3rd Feb 2023

EU projects dismal growth, urges investment

  • Katainen (l) and Moscovici have different views on the way out of the economic chill (Photo: ec.europa.eu)

The European Commission lowered its growth forecasts for the EU and the eurozone area, blaming the wars in Ukraine and the Middle East, and urging governments to do more to spur investments.

According to the Autumn forecast growth in the EU is now expected to be 1.3 percent of GDP this year, compared to 1.6 percent projected in spring, while the eurozone economy is to grow by only 0.8 percent, compared to the earlier projection of 1.2 percent.

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For 2015, the outlook is also pessimistic: the EU economy is expected to grow by 1.5 percent (down from 2 percent predicted in spring) and the eurozone by 1.1 percent (compared to the spring forecast of 1.7 percent).

EU "growth" commissioner Jyrki Katainen admitted that forecasts are difficult to trust, especially since all other international institutions publishing economic forecasts "have been more often wrong than right" because there are so many variables on growth, employment, and investments.

"So it's up to us now and member states to change these forecasts. If member states do their job by reforming the societies, to increase competitiveness, we can expect higher growth," he said.

A former Finnish prime minister broadly seen as a fiscal hawk, Katainen emphasised "structural reforms" as the best way out of the economic chill.

He said it was not enough to use Germany as an engine of the eurozone economy, but insisted that all countries must "play their part" in the overall economic relaunch.

Katainen was economic affairs commissioner in the last months of the Barroso commission, but now oversees several commissioners as vice-president for "jobs, growth, investments and competitiveness".

He will also be in charge of securing a €300 billion package in private and public investments, as promised by his new boss, Jean-Claude Juncker.

He spoke more about structural reforms than investments.

But his successor in the economic affairs portfolio, Pierre Moscovici, is more interested in investment and in spurring demand in sluggish economies.

Moscovici is a former French finance minister who failed to bring his country's deficit below the 3 percent threshold set by EU riles. According to the data presented Monday, France did cut back its deficit from 6.8 percent in 2010 to 4.1 percent in 2013, but the gap is now growing again: 4.4 in 2014, 4.5 next year, and 4.7 in 2016.

By comparison, Ireland cut its deficit from 32.4 percent in 2010 to 3.7 percent this year and will reach 2.9 percent next year.

Asked how credible these rules are when it comes to big member states like France, Katainen said it is not enough to look at the "nominal figures", but also at the individual economic situations, which is why the EU rules are "flexible".

Katainen praised Ireland for having the biggest growth rate in the EU this year: 4.6 percent of GDP, while France's economy is almost at a standstill: 0.3 percent growth.

Low inflation is also set to continue, mainly because of cheap energy and food on the global markets and because "we are lacking demand", Katainen said.

A "surprise" in the commission's statistics was Hungary, who topped the EU investments ranking with 12.7 percent in 2014, followed by Malta with 12 percent.

Moscovici explained that this was due to the fact that 2014 was a "peak in EU funds consumption" and that several foreign direct investments in the automotive sector were counted.

In 2015, the investments are forecast to fall back to "normal" in Hungary, at a rate of 3.1 percent.

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