Saturday

25th Feb 2017

EU recovery 'gaining traction', amid fears of low inflation

  • EU commissioner Siim Kallas (r) revised up the bloc's growth forecast for 2014, saying the EU's recovery is "gaining traction" (Photo: ec.europa.eu)

The EU executive raised its growth projections across the Union to 1.6 percent for 2014, while its forecasts for the eurozone remain unchanged at 1.2 percent.

Neighbouring Baltic states Latvia and Lithuania are forecast to be the top-performing economies this year, achieving growth rates of 3.8 percent and 3.3 percent, respectively. Lithuania will become the 19th country to join the eurozone in January.

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.

Siim Kallas, who is covering Olli Rehn's economic affairs portfolio while Rehn is on the European Parliament campaign trail, said that the figures showed the EU's economic recovery is "gaining traction" and becoming more "broad-based' across the bloc.

"The policies implemented in recent years are bearing fruit. Investment is rebounding. While unemployment remains high in many member states, the labour market has stabilised and we expect some improvement in the next two years".

Cyprus and Croatia, who joined the EU last summer, are expected to be the only countries in recession in 2014.

Meanwhile, the figures confirm that the Greek economy will expand slightly by 0.6 percent this year and will reach an impressive 2.9 percent growth rate in 2015. This will bring an end to six consecutive years of recession, which have wiped out more than 25 percent of Greece's economic output.

Kallas commented that financial market confidence was returning in Greece, noting that "the large amounts of private equity capital raised by Greek banks in recent weeks have exceeded market expectations".

But Veronica Nilsson, Confederal Secretary of the European Trade union Confederation described the bloc's unemployment rate of 10.5 percent as "a disgrace" which "should be worrying the European Commission far more than they seem to.”

The commission believes that the EU's jobless rate will fall to 10.1 percent next year and from 11.8 percent to 11.4 percent in the eurozone, with larger decreases of 2 percent and 1.5 percent respectively, expected in Greece and Spain, the countries with the highest unemployment rates.

But officials are becoming increasingly concerned that the EU's already sluggish recovery could be hit by low inflation.

Forecasts for price inflation have been revised down to 0.8 percent this year and 1.2 percent in 2015, well below the European Central Bank's (ECB's) target of 2 percent. A prolonged period of low inflation risks further subduing consumer demand, making it harder for businesses to create new jobs and make headway into the EU's large jobless total.

With the ECB's main interest rates already at a record low of 0.25 per cent since November, while the main rate on deposits has been at zero since July 2012, the Frankfurt-based bank, headed by Mario Draghi, is pondering whether to introduce negative interest rates or print money to stimulate more demand.

Meanwhile, Kallas said that the ongoing crisis in the Ukraine posed one of the greatest risks to the stability of the EU economy.

"The one main risk is clearly the external tensions and uncertainty which surrounds us, especially related to the crisis in Ukraine,” he said.

EU recovery "gaining ground", commission says

The EU's economic recovery will gather speed in 2014 and 2015, the EU commission has said, indicating that the worst of the economic storm which hit Europe is over.

Column / Brexit Briefing

Searching for a voice and a standard bearer

As Britons come to terms with the reality of Brexit many Remainers are now listless, looking for someone to present a viable alternative to Theresa May's dominance

Opinion

The crisis we face in the Lake Chad Basin

With no end in sight to this crisis, humanitarian actors must call for concerted engagement of political, developmental and security actors to help stabilise the region, writes the head of the UN migration agency.

Column / Brexit Briefing

Searching for a voice and a standard bearer

As Britons come to terms with the reality of Brexit many Remainers are now listless, looking for someone to present a viable alternative to Theresa May's dominance

News in Brief

  1. Spanish court jails former IMF chief Rato
  2. Macron proposes Nordic-style economic model for France
  3. Germany posts record high budget surplus
  4. Labour ousts Ukip in Brexit homeland
  5. Dutch lower house approves EU-Ukraine treaty
  6. WTO says Russian pork ban was illegal
  7. Belgian nuclear plant made 'significant progress' on safety
  8. Report: Commission gauging EU support for Poland sanctions

Stakeholders' Highlights

  1. EURORDISJoin the Rare Disease Day and Help to Advocate for More Research on Rare Diseases
  2. European Healthy Lifestyle AllianceStudents Who Are Considered Fit Get Better Grades in School
  3. QS World MBA TourMeet with Leading International Business Schools in Paris on March 4th
  4. Malta EU 2017Economic Governance: Agreement Reached on Structural Reform Support Programme for Member States
  5. Socialists & DemocratsWomen Have to Work Ten Years Longer to Match Lifetime Earnings of Men
  6. Counter BalanceTrans-Adriatic Pipeline Is a Major Risk for Banks, Warns New Analysis
  7. Martens CentreEU and US Migration Policies Compared: Join the Debate on February 28th
  8. Swedish EnterprisesTechnology and Data Flows - Shaping the Society of Tomorrow
  9. UNICEFNearly 1.4 Million Children at Risk of Death as Famine Looms Across Africa and Yemen
  10. Malta EU 2017End of Roaming Fees: Council Reaches Agreement on Wholesale Caps
  11. Nordic Council of MinistersNordic Innovation House Opens in New York to Help Startups Access US Market
  12. Centre Maurits CoppietersMinorities and Migrations