If one believes the economic forecast of the European Commission, Europe’s economy is growing and growing and growing - for the fourth year in succession. In spite of this, there were no joyful cheers at the press conference of Pierre Moscovici (Commissioner for Economic and Financial Affairs). Because the presented results left no doubt that the European Union has still a long way to go until it has recovered from the financial crisis 2008 and that it is still in no position to absorb fluctuations in the global economy.

Europe's economy – an uncertain future

Following a moderate economic upturn in the European economy during the previous three years, the forecast for 2016 predicts a slight growth of 1.7 percent for the euro area (1.9 percent EU-wide) – however, this is already 0.1 percentage points down than predicted in the forecast some months before. Compared to the already weak global economic growth of 3.6 percent, the EU is thereby significantly below this figure. The European Commission sees the reasons for this development in the fact that external effects such as uncertainties in the financial markets, the slowdown in the growth of the People's Republic of China and the increase of interest rates by the Federal Reserve have an impact on European growth. However, positive on the one hand is that the low euro exchange rate (compared to the US Dollar: 1.1) makes exports cheaper, thereby triggering a growth-promoting effect and that on the other hand the low oil prices increase purchasing power, but still do not remove the risk of deflation. The Commission still works on the assumption that growing private consumption will continue to have the strongest influence on growth. Associated with this development, data presented showed a slight fall in unemployment. However, this year the reduction will be slower than in 2015 and at an unemployment rate of 9 percent, it remains at a high level. Investments within the European Union stagnate due to economic and political uncertainties; however, due to the increased purchasing power and the demand, which has risen as a result, they should be increased again. Apart from this, the Commission assumes that public spending, which took place with regard to refugee relief, will have a positive influence on growth.

The future remains uncertain, even though this year’s data does indicate a recovery of the European economy; external as well as internal changes might suddenly occur, which might result in a further downward adjustment of the forecast.

Further Information:

Press release of the Commission

Winter Growth Report

All relevant documents - Summary