Brussels, 13/05/2011 (Agence Europe) - Unveiling the European Commission's spring economic forecasts on Friday 13 May, EU Economic and Monetary Affairs Commissioner Olli Rehn commented that he had some good news for once, although he pointed out that the strength of the economic recovery varied from country to country and inflation would continue its upward trend, although this would be temporary. Budget consolidation is starting to bear fruit at the macroeconomic level, again with great differences among the member states, despite increases in debt and tensions on the money markets over sovereignty debt, which make forecasting very tricky.
The Commission forecasts that in the EU as a whole, GDP will grow by 1.8% and 1.9% in 2011 and 2012, and by 1.6% and 1.8% in the eurozone, but this will vary widely from one country to another. In the eurozone, the greatest economic growth in 2011 will be seen in Estonia (4.9%), Finland (3.7%), Luxembourg (3.4%) and Germany (2.6%), but two countries (which have requested international aid) will be in recession, to the tune of -2.2% for Portugal and -3.5% for Greece, although Ireland is expected to recover slightly with growth of 0.6% in 2011. Rehn pointed out that private consumption (within the EU) was boosting economic recovery.
The higher inflation rates (3% in the EU27 and 2.6% in the eurozone in 2011) are not expected to continue into 2012 (when inflation of 2% is forecast for the EU27 and 1.8% for eurozone). The hike in commodity prices, particularly fuel, remains an inflationary risk.
Budget tightening. Olli Rehn welcomed the way member states' belt-tightening was starting to bear fruit. The average public deficit (as a proportion of GDP) stood at 6.4% in the EU27 in 2010 and 6% in the eurozone, but is expected to shrink to 4.7% in the EU27 and 4.3% in the eurozone in 2011 and to 3.8% and 3.5% respectively in 2012. Public debt will continue its upward trend, however, explained Rehn, reaching 82.3% in 2011 and 83.3% in 2012 in the EU as a whole, and 87.7% and 88.5% in the eurozone. There are great gaps among eurozone countries for both the public deficit and the public debt. Five EU member states will respect the budget rule of a budget deficit of no more than 3% of GDP in 2011, namely Germany, Estonia, Luxembourg, Finland and Malta. Ireland's public deficit is expected to reach 10.5%, Greece's 9.5% and Ireland's 5.9%. The public debt picture is similar for 2011, with only Estonia (6.1%), Luxembourg (17.2%), Slovenia (42.8%), Slovakia (44.8%) and Finland (50.6%) meeting the requirement of keeping their debt below 60% of GDP. Greece's debt is expected to total 157.7% of GDP in 2011, Italy's 120.3%, Ireland's 112% and Portugal's 101.7%.
Although recognising that the Commission's budget forecasts for Greece are below the targets set out in the country's austerity programme, Rehn praised the country for its unprecedented efforts, mentioning the need to speed up the structural reforms and privatisation programme that is expected to net €50 billion over five years. He said he would be awaiting the outcome of the economic fact-finding mission underway in Athens at the moment before talking about new aid for the country, predicting that further measures would definitely be needed. (M.B./transl.fl)