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BackThe economic recovery had unexpectedly stalled at the end of 2011, said Olli Rehn, EU Commissioner for Economic and Monetary Affairs yesterday in a press conference. However, in view of the extensive austerity measures introduced by many EU countries in order to cut public spending it is more than astonishing that the Commission is surprised by the poor state of the economy. Nevertheless, Rehn is convinced that acting decisively could turn the tide towards increasing growth and employment.
Whilst the forecast for 2012 includes a growth rate of 0.0 % for the European Union and even a light recession of -0.3 % of the Gross Domestic Product in the Eurozone, Austria, according to the Commission, can expect a slight growth rate of 0.7 % for this year. However, compared to the predicted global economic growth, this is not very much: in 2012, the global economy is expected to grow by 4.4 % (without EU), whereby regional growth will be very different; apart from this, the forecast has to take the increased energy prices into account. Otherwise, for this year the Commission expects for the EU more downside risks than any improvement of the economic outlook.
In view of the low confidence that entrepreneurs and consumers have in the EU, it remains to be seen what kind of measures Rehn will take to reverse the trend towards more growth and employment. As outlined by the Economics Commissioner, the situation on the financial market will unfortunately remain fragile. In particular the credit terms for the private sector continue to be exacerbated - which might have a negative impact on the real economy. However, Rehn does not see any indications for a credit crunch; the European Central Bank had helped to prevent this. After all, commented the Economics Commissioner, the markets for government bonds had improved; their risk had now been downgraded.
The situation in Greece continues to be disastrous: the country will also in 2012 remain in deep recession. Following a minus of 6.8 % in 2011, the forecast for this year is a decline in economic output by 4.4 %. Hence, the Island State will remain in recession for the fifth year running. According to the opinion of the Commission, the latest cost cutting measures, eagerly awaited by the EU, among them the reduction of the minimum wages by 22 % shall help to reduce unit labour costs by 15 % over the next three years. However, even the Commission admits that exports are less dynamic than they were three years ago, in spite of “competition strengthening” measures such as reducing wage costs. Another revelation, which apparently came as a complete surprise to the Commission.
This year, the recession will presumably also hit Portugal with -3.3 %, Italy with -1.3 %, Spain with -1.0 %, the Netherlands with -0.9 %, Cyprus with -0.5 % and Belgium, Slovenia and Hungary each with je -0.1 %. The strongest growth has been forecast for Poland with 2.5 %.
In view of the growth figures, which came as a complete surprise to the Commission, it remains completely open when the EU States will at last overcome the serious crisis triggered by the financial sector in 2008 and when they will find their way back to recovery and improved growth figures.
Press release of the Commission on the spring forecast
In view of the low confidence that entrepreneurs and consumers have in the EU, it remains to be seen what kind of measures Rehn will take to reverse the trend towards more growth and employment. As outlined by the Economics Commissioner, the situation on the financial market will unfortunately remain fragile. In particular the credit terms for the private sector continue to be exacerbated - which might have a negative impact on the real economy. However, Rehn does not see any indications for a credit crunch; the European Central Bank had helped to prevent this. After all, commented the Economics Commissioner, the markets for government bonds had improved; their risk had now been downgraded.
The situation in Greece continues to be disastrous: the country will also in 2012 remain in deep recession. Following a minus of 6.8 % in 2011, the forecast for this year is a decline in economic output by 4.4 %. Hence, the Island State will remain in recession for the fifth year running. According to the opinion of the Commission, the latest cost cutting measures, eagerly awaited by the EU, among them the reduction of the minimum wages by 22 % shall help to reduce unit labour costs by 15 % over the next three years. However, even the Commission admits that exports are less dynamic than they were three years ago, in spite of “competition strengthening” measures such as reducing wage costs. Another revelation, which apparently came as a complete surprise to the Commission.
This year, the recession will presumably also hit Portugal with -3.3 %, Italy with -1.3 %, Spain with -1.0 %, the Netherlands with -0.9 %, Cyprus with -0.5 % and Belgium, Slovenia and Hungary each with je -0.1 %. The strongest growth has been forecast for Poland with 2.5 %.
In view of the growth figures, which came as a complete surprise to the Commission, it remains completely open when the EU States will at last overcome the serious crisis triggered by the financial sector in 2008 and when they will find their way back to recovery and improved growth figures.
Press release of the Commission on the spring forecast