Four times a year, the Commission publishes a forecast of the economic development of the EU resp. the Euro area; the main focus in both interim reports being on inflation and the GDP. Concerning the latter, one now expects growth of 1.8 % for 2010; previously 1 % had been forecast. Growth was particularly higher than expected in the 2nd quarter, which the report to a certain degree attributes to a comparatively strong domestic demand during this period.

In view of the figures and prognoses, Commissioner Rehn considers careful optimism as appropriate and speaks of a slow recovery of the European economy. At the same time, he is warning that growth in the second half of the year will be more moderate and names as one of the three causes the imminent budget consolidations in the Member States. According to Rehn, the uncertainty concerning the 'how and when' of these measures could have a short-term negative impact on domestic demand. Nevertheless, he sticks to the urgent requirement to tackle the debt reduction of the national budget as a matter of urgency, because, continues Rehn, this would promote growth in the long term.

How the consolidations will be structured is a matter for the national government. Rehn, however, proposes a coordinated and also (country-specific) differentiated approach. Supervision is the responsibility of the Commission; a fact that Rehn reiterated on Wednesday in a speech before the European Parliament. A new instrument in this context is the "European Semester", which was adopted last week by ECOFIN. This reporting cycle, which will commence at the beginning of 2011, will act as a type of early warning system to prevent future developments like in Greece. With regard to budget consolidation, the Member States are already now and even more in future under pressure. 

Budget consolidation through spending cuts

The Commission has on many occasions come out in favour of tax reductions resp. a reduction of the tax rate. Hence, a "coordinated approach" could mean that the Commission encourages the countries to consolidate their budgets without raising the tax rate. This would inevitable result in spending cuts.

This approach has also been covered by the Growth and Stability Pact: "The Member States undertake to abide by the medium-term budgetary objective of positions close to balance or in surplus".

As a reminder: the Council, following the proposal of the Commission decided at the height of the crisis, to soften the criteria of the Growth and Stability Pact, to give the Member States the option to counteract in terms of fiscal policy. Afterwards the Pact was to be in force again.

There are certainly different opinions as to when the crisis is over.

As mentioned above, Rehn interprets the interim report as a signal of recovery after the crisis and is obviously convinced that the time for budget consolidation has arrived. Hence, a wide range of different income-related measures is already being discussed and partly implemented in the Member States.

Crisis not yet over

In contrast, WIFO economist Stephan Schulmeister declared this week that we are still "in the middle of the crisis": "The economic crisis is not over for a long time; the second quarter 2010 was an 'exception' because the economic support programmes in Europa are still making an impact and the problems in the USA and China had not yet had an effect".

An argument of the side of the employees is also that the crisis is only over when unemployment falls and the labour market relaxes.

The ÖGB MEP Evelyn Regner for example told the "press" on Wednesday: "With overall more than 23 million unemployed, who, due to the weak growth in most of the Member States and in other key regions of the world, will be joined by others, the crisis is far from over. A too drastic reduction of public deficits and debts now is as socially unacceptable as economically dangerous."

In order to make the voice of employees heard even more, the European Trade Union Confederation organises on 29th September in Brussels and some other European capitals a joint day of action under the motto: