Economic figures and the political picture raise questions for the EU 27
Not even the Eurogroup and Ecofin were able to unwind the knots of European economy and politics. In Brussels efforts are being made to put on the agenda all those issues needing to be addressed with diplomacy, patience and far-sightedness. Greece’s situation of instability (constantly risking a default and lacking a solid government majority), Spain’s worsening financial crisis, the political weakening of German Chancellor Angela Merkel following the latest electoral defeat: these are only three aspects of a rapidly developing situation. And while the tug of war between the supporters of “discipline” and the champions of “growth” continue, the Commission released the Spring Economic forecasts, that brings no good news.
Few positive signs. “Economic activity in the EU contracted in the last quarter of 2011 and is estimated to have also done so in the first quarter of 2012. A gradual recovery is forecast to start in the second half of the year. GDP is nonetheless expected to remain subdued with large disparities across Member States. Employment is also expected to contract. Unemployment rates are surging in some member states especially among the young”. On May 11 Commission Vice-President for Economic and Monetary Affairs and the Euro Olli Rehn, presented the spring forecasts 2012-2013. Positive signs are registered as relates to global trade, while production and credit availability are stagnating. The 182-page blueprint presented by the Finnish Commissioner states: “Annual GDP growth this year is forecast to be flat (0.0%) in the EU and -0.3% in the euro area. For 2013, modest growth in the EU and 1% in the euro area is projected”. “Forecasts are based on restored business and consumer confidence”, linked to measures at national level.
Reforms and discipline. “We are witnessing an ongoing adjustment of the fiscal and structural imbalances built up before and after the onset of the crisis, made worse by weak economic sentiment. Without further determined action, however, low growth in the EU could remain”. Olli Rehn delved into the bleak economic prospects for the EU. But the Commissioner also underlined: “with adequate reforms and fiscal discipline”, recovery is projected to start in the second half of 2012 and extend into 2013. “Sound public finances are the condition for lasting growth, and building on the new strong framework for economic governance, we must support the adjustment by accelerating stability and growth-enhancing policies”. The report fails to identify signs of job growth for the near future. Unemployment is expected to remain “high”, amounting to 10% in EU27, and 11% in the euro area. Inflation is set to “moderate gradually as the impact of higher oil prices and tax increases fades away”. “Fiscal consolidation is forecast to progress, with public deficits in 2013 declining to 3.3% in the EU and just below 3% in the euro area”.
Country by country. The continental picture is very diversified: as regards GDP, for example, Germany’s GDP is set to expand by 0.7% for 2012 as a whole and rise to 1.7% in 2013. A similar trend is projected for France (0.5% in 2012, and 1.3% next year); the United Kingdom is set to register a scant 0.5% and rise to 1.7% in 2013. For 2012, Italy registers a negative -1.4%, but is expected to reach +0.4% in 2013. The most problematic situations are recorded in Greece (-4.7% in 2012; 0.0% in 2013) and Spain (respectively -1.8 and 0.3%). Conversely, 2.7% is registered for Poland, expected to slow down up to 2.6% next year.
The comments of the Commissioner. On the basis of the economic forecasts of May 30 the Commission will issue its “recommendations” for each Member Country, which will be the object of analysis by the European Council of June 28-29 (a further Council is scheduled to take place May 23rd). But vice president Rehn advances a set of interpretations at national level, having reiterated his “confidence” that the government will pursue the path of “fiscal discipline”; a “preliminary condition for growth”. As regards the economic downturn registered in The Netherlands, Rehn highlighted the need to cut the deficit; while further measures – in addition to those adopted by Monti’s government - are not deemed necessary. After the instalment of the new leadership, France is expected to continue adopting measures for budgetary monitoring. Rehn expressed his concern over Greece and said he hopes that a government will be formed that “is capable to continuing the commitment taken with the EU”. The Commissioner mentioned the referendum via which the Irish population is called to vote on the “Fiscal Compact” treaty, and said that “the citizens of Ireland will decide. However, the Commission is in favour of the treaty, which is a useful tool for all the States”.