News
BackThe autumn prognosis, which was presented by Economic and Monetary Affairs Commissioner Joaquín Almunia this Tuesday, for the first time again forecasts slightly positive growth rates for the coming two years. At an unemployment rate of over 10 %, however, the situation on the labour market will continue to deteriorate over the coming two years. Almunia emphasized that from 2011 at the latest savings had to be made again nevertheless.
Since the fourth quarter of 2008, the economy throughout the EU has shrunk by 5 %, making the current crisis the most serious crisis in the history of the Union. Differences in the severity of the recession between the Member States can partly be explained by the various levels of affectedness of the financial sector, the existence of a housing bubble and the dependence on the world trade.
For the second quarter of 2009, the Commission for the first time again expects slightly positive growth rates, however, leaves the overall prognosis for 2009 unchanged at -4 %. For 2010 and 2011, the Commission forecasts a slightly positive growth of 0.7 % resp. 1.6 % for the EU27 (1.5 % for the Eurozone). The forecast for Austria is a slow recovery with an economic growth of 1 % in 2010 and 1.5 % in 2011.
Economic growth dependent on foreign trade and domestic demand
For Austria, as a small, open economy, the forecast is in particular dependent on the development of foreign trade: if the remainder of the European economy recovers faster than anticipated this would result also in a greater demand for Austrian products and thereby to a higher economic growth based on exports. If, on the other hand, the international trade does not recover, this will also delay the economic growth in Austria, is the opinion of the Commission.
Under normal circumstances, a boost to exports leads to an increase in investments, which in turn results in a rise in employment and consumption. In the current situation of low credit growth, high household debt and unemployment, which in turn have a negative impact on domestic demand, this relationship between exports and employment, will, however, be less significant.
Unemployment continues to rise
Short-term policy measures such as short-time work and accelerated investments were able to cushion the seriousness of the crisis on the labour market. Over the next two years, when these short-term effects peter out, the unemployment rate in the EU will continue to rise. From currently 9.2 % (September 2009) to 10.3 % in the coming year and at 10.2 % remaining at a high level in 2011 (EU27). The forecast for the labour market in the Eurozone is - due to the higher weight of Spain with an unemployment rate of 20 % in the smaller group - at 10.7 % 2010 and 10.9 % 2011 even worse.
Making savings is now called for again
The public deficit in the EU this year will triple from 2.25 % to 7 %. On the one hand, this deterioration can be put down to the impact of the automatic stabilizers and the economic stimulus packages and of decreasing tax income - due to the recession - on the other. In Austria, the budget deficit will increase from 4.3 % of the GDP (2009) to 5.5 % in 2010.
After the last meeting of the Economic and Finance Ministers, Almunia had announced that the fiscal measures, which had been introduced as a result of the crisis had to end in 2011 (“exit strategy”), provided a sustained economic upturn had materialized. In his forecast he stated that this sustained economic upturn had now arrived and that the Commission, during the course of the ongoing deficit procedures, would - in spite of the poor prospects on the labour market - order some Member States to adopt austerity measures already in 2010. All Member States are expected to reduce their public debt by at least 0.5 % percentage points from 2011 at the latest.
Further information:
European Economic Forecast Autumn 2009
For the second quarter of 2009, the Commission for the first time again expects slightly positive growth rates, however, leaves the overall prognosis for 2009 unchanged at -4 %. For 2010 and 2011, the Commission forecasts a slightly positive growth of 0.7 % resp. 1.6 % for the EU27 (1.5 % for the Eurozone). The forecast for Austria is a slow recovery with an economic growth of 1 % in 2010 and 1.5 % in 2011.
Economic growth dependent on foreign trade and domestic demand
For Austria, as a small, open economy, the forecast is in particular dependent on the development of foreign trade: if the remainder of the European economy recovers faster than anticipated this would result also in a greater demand for Austrian products and thereby to a higher economic growth based on exports. If, on the other hand, the international trade does not recover, this will also delay the economic growth in Austria, is the opinion of the Commission.
Under normal circumstances, a boost to exports leads to an increase in investments, which in turn results in a rise in employment and consumption. In the current situation of low credit growth, high household debt and unemployment, which in turn have a negative impact on domestic demand, this relationship between exports and employment, will, however, be less significant.
Unemployment continues to rise
Short-term policy measures such as short-time work and accelerated investments were able to cushion the seriousness of the crisis on the labour market. Over the next two years, when these short-term effects peter out, the unemployment rate in the EU will continue to rise. From currently 9.2 % (September 2009) to 10.3 % in the coming year and at 10.2 % remaining at a high level in 2011 (EU27). The forecast for the labour market in the Eurozone is - due to the higher weight of Spain with an unemployment rate of 20 % in the smaller group - at 10.7 % 2010 and 10.9 % 2011 even worse.
Making savings is now called for again
The public deficit in the EU this year will triple from 2.25 % to 7 %. On the one hand, this deterioration can be put down to the impact of the automatic stabilizers and the economic stimulus packages and of decreasing tax income - due to the recession - on the other. In Austria, the budget deficit will increase from 4.3 % of the GDP (2009) to 5.5 % in 2010.
After the last meeting of the Economic and Finance Ministers, Almunia had announced that the fiscal measures, which had been introduced as a result of the crisis had to end in 2011 (“exit strategy”), provided a sustained economic upturn had materialized. In his forecast he stated that this sustained economic upturn had now arrived and that the Commission, during the course of the ongoing deficit procedures, would - in spite of the poor prospects on the labour market - order some Member States to adopt austerity measures already in 2010. All Member States are expected to reduce their public debt by at least 0.5 % percentage points from 2011 at the latest.
Further information:
European Economic Forecast Autumn 2009