Brussels, 25/02/2010 (Agence Europe) - On Thursday 25 February, EU Economic and Monetary Affairs Commissioner Olli Rehn presented the European Commission's mid-term economic forecast that economic recovery is continuing in the European Union but is still fragile. Echoing comments he made during his hearing with MEPs, Rehn said that investment would be required in education, innovation and greener, more intelligent jobs in order to get out of the crisis - areas covered by the EU 2020 economic strategy. Tightening the state belt would also be required. He said he was worried about both areas, especially as there was no such thing as a miracle solution.
Echoing its autumn forecasts (see EUROPE 10011), the Commission forecasts growth of 0.7% of gross domestic product (GDP) in both the EU as a whole (the EU27) and the eurozone in 2010. For the seven biggest member state economies, which make up a whopping 80% of the EU GDP, economic growth is predicted to be positive - in Poland (2.5%), Germany (1.2%), France (1.2%), the Netherlands (0.9%), Italy (0.7%) and the United Kingdom (0.6%). Spain, however, will still be in recession (-0.2%). In the updated forecasts, the Commission suggests that GDP will rise by only 0.2% in the EU27 and eurozone in the first quarter of 2010, and by 0.3% in Q410. Described as disappointing, growth in Q309 was a bare 0.1% in the EU27 and eurozone, after growth of 0.4% in Q309.
The eurozone experienced its worst recession yet in 2009 with GDP contracting by a record 4% (5% in Germany, 3.6% in Spain, 4.7% in Italy and 2.2% in France). The Commission is more cautious than the chair of the Eurogroup (the eurozone finance minsters), Jean-Claude Juncker, who forecast last week that growth in the eurozone would remain delicate this year but would hover at a slightly higher level of around 1%.
For the world economy, the European Commission forecasts growth of above 4% in 2010 despite a gradual disappearance of the impact of the economic recovery measures. As expected, the Commission forecasts much stronger growth in emerging economies, stimulated by foreign direct investment and investors being willing to countenance greater risk for higher returns. It remains to be seen how this will impact on economic recovery in the EU this year.
Preventing inflation and deflation. The Commission has not changed its inflation forecasts for the eurozone. At the end of 2009, consumer prices rose slightly, with annual inflation hitting 1.0% in the EU27 and 0.3% in the eurozone, explains the Commission. The Commission expects inflation to remain at around 1.4% in the EU27 (in the autumn 2009 forecasts, it suggested 1.3%) and 1.1% for the eurozone (unchanged on the autumn forecasts). Inflation is expected to reach 2.4% in the United Kingdom, 2.3% in Poland, 1.7% in Italy, 1.2% in France, 1.1% in Spain, 0.8% in the Netherlands and 0.7% in Germany. (M.B/L.C./transl fl)