Brussels, 28/08/2014 (Agence Europe) - On Thursday 28 August, French President François Hollande proposed that a eurozone summit be held to fight the spectre of “lengthy stagnation” (our translation throughout).
At the extraordinary European summit on Saturday 30 August, “I will propose that a eurozone summit be held as soon as possible to take the necessary decisions”, the Socialist leader told the annual conference of ambassadors of France, in Paris on Thursday 28 August.
Refusing to accept the possibility of Europe descending into “a lengthy and possibly unending period of stagnation”, Hollande said that a European initiative to boost the economy was “in Europe's interests, because what is in question is its place in the global economy”. He went on to state that “we cannot be seen as a continent with the lowest levels of growth in the world and the only one not to experience economic recovery”.
The possible topics for discussion include an initiative which could be taken by the European Union to relaunch growth, putting flesh on the bones of the €300 billion package over three years aiming to stimulate public and private investment, which the future President of the European Commission, Jean-Claude Juncker, discussed when he was appointed.
Although no date has so far been set, the summit is likely to take place before the Commission presents its opinion on the draft 2015 budgets of the member states, in early November.
The issue of the pace of the reduction of public deficits could also be raised. In mid-August, France admitted that it woulds not be able to bring its deficit below 4% of national GDP, which jeopardises the 3% target laid down for 2015 (see EUROPE 11136). In July, the European leaders did not call for any changes to the rules of the stability and growth pact, calling instead for the flexibility which already exists in the European budgetary rules to be used (see EUROPE 11110).
Confidence indicators down. On Thursday, the European Commission revealed that economic confidence had fallen in August to its lowest level since December 2013 - 100.6 - a drop of 1.5 points. The same trend can be seen across the EU: the economic sentiment indicator fell by 1.2 points to 104.6. The drop in this indicator stems from a deterioration in the component which measures confidence in retail trade (-2.3 points), consumer confidence (-1.6), industry (-1.5) and, to a lesser extent in the sector, services (-0.5 points).
These downward figures do not come as a “ surprise following the disappointing second-quarter growth figures and the geopolitical tensions that have marked this summer. It is nonetheless a source of concern”, said Jyrki Katainen, Commissioner for Economic and Monetary Affairs, in a statement published shortly before the figures were released. He went on to say that without confidence, there will be no pick-up in investment needed for a more robust recovery in growth and employment. This factor was something he stressed at his hearing before the committee on economic and monetary affairs of the EP, in July of this year (see EUROPE 11121).
“There is an urgent need to use all available tools to support growth and promote investment”, he added, calling for the momentum of structural reforms to be stepped up. He argues that “it is only through reforms that we will achieve a sustainable recovery in growth and job creation”. He recommended a balanced raft of budgetary policies targeting sustainable growth whilst maintaining stability, particularly in the composition of public expenditure.
Of the largest economies of the eurozone, sentiment in Italy fell the furthest, by 4.1 points, followed by Germany at -1.9. The drop was more moderate in France (-0.6) and in the Netherlands (-0.8). A more moderate drop in the indicator in the largest EU economies outside the euro zone (United Kingdom: -1.1 and Poland: -1) gave a less steep drop in the indicator in the EU as a whole. It is also worth noting that the business climate indicator was down to 0.16 in August from 0.17 in July. (MB/EL)