The economy grows, but employment not yet

The Commission's Forecasts present a gradually improving picture. It's a"Cyclic Growth", Moscovici said. Unbalances among EU Countries

It’s a “cyclic recovery” said Pierre Moscovici, EU Commissioner for Economic Affairs. On his face appeared a stretched smile. Spring is timidly appearing also within European economy after a 7-year crisis, shutdown enterprises and widespread unemployment. A radical change is yet to come. However, figures show that production increases, consumption is recovering (to the extent that inflation is projected to rise in the short term) while investors are regaining confidence. What – unfortunately – is still lacking is employment. The presentation of the “Spring Economic Forecasts” by the Commission in Brussels, on May 5, shed light on what had hitherto been vaguely glimpsed. The end of the tunnel seems near, although macroeconomic data fails to correspond to an immediate rise in household incomes, greater job perspectives for the young, nor financial certainties for over-indebted Countries. Moscovici himself clarified the situation. Compared to February, the forecasts were reviewed from a positive angle, “favoured by economic factors” (relatively low oil prices, the euro has continued to depreciate, along with the effects of the quantitative easing of the European Central Bank). However, it is necessary to consider “the heavy legacy of the crisis”, he added, while structural reforms in certain countries have not yet been implemented, notably in some Mediterranean countries including Italy, Greece and Cyprus. But even his homeland, France, is still skating on thin ice, just as Croatia and Finland. The economy grows, Moscovici pointed out, but unemployment, though on a declining path, “still remains high”. With more than 20 million “officially” unemployed in the 28 Member States, this continues being the European urgency. This year, unemployment in the EU and in the euro area is expected to drop respectively to 9.6% and 11.0%, “in step with the extension of labour market improvements to other sectors.” This trend is projected to continue in 2016, “especially in countries that have recently implemented labour market reforms”. In 2016 – according to forecasts of the Executive – unemployment is set to fall to 9.2 % in the EU and 10.5 % in the euro area. Compared to 12% today… As for GDP, the EU grew from 1.4% in 2014 to 1.8% this year. For 2016, the Commission forecasts growth of 2.1 %, while in eurozone countries a 0.9% growth was registered for 2014, 1.5% this year and 1.9% is projected for 2016. Poland is the fastest growing among large European countries: 3.3% this year; followed by Spain with 2.8; UK with 2.6; Germany 1.9%. France’s GDP in 2015 is projected to 1.1%, to eventually decrease in the next two years. The situation is different in Italy: at a 0.6% standstill in 2015, GDP is projected to grow thanks to external demand up 1.4% in 2016. Moscovici’s words were echoed by his colleague Valdis Dombrovskis, responsible for the euro currency and Social Dialogue: “The recovery of Europe’s economies is strengthening. While this is encouraging, we have to make sure economic growth is lasting – sustainable. This can happen by implementing the three priority approach endorsed at EU level – structural reforms, stepping up investment and encouraging fiscal responsibility, while addressing country-specific challenges”. Dombrovskis added: “The country-specific policy recommendations to be presented by the European Commission in mid-May will be another important step in translating this approach into concrete growth-friendly policies”. An interesting element emerged from the lengthy documents illustrated by the Commission: “domestic demand is the factor that most contributes to GDP growth, with an acceleration of private consumption expected for 2015 and a recovery of investments in 2016”. Confirmation of long-term recovery will depend on the international context and on the performance of global competitors: at the moment “global growth is steady”. However, there remains the hallmark of internal imbalances that hinders the revival of the single European market. As regards public accounts, with the overall fiscal stance in the EU broadly neutral – neither tightening nor loosening – fiscal policy is “supportive of growth”. Some recalled the overcoming of the growth-rigour approach. However, the burden of public debt still weighs heavily in many Countries. With the passing of time it should be possible to see the effects of structural reforms – is the hope of the Commission – and of the investment plan for Europe, supported by the same Commission.

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