Brussels, 03/05/2016 (Agence Europe) - Growth will remain stable in the European Union in 2016 compared to 2015, despite a worsening international environment, according to the spring economic forecasts published by the European Commission on Tuesday 3 May.
Due to strong performances for consumption, “the resistance of European growth is a good sign”, said the Commissioner for Economic and Financial Affairs, Pierre Moscovici. With the external environment “worsening” due, amongst other things to the “rebalancing of Chinese growth” and a “deceleration in advanced economies”, he argued that the best way to learn from this situation is to continue the structural reforms and to keep stimulating investment.
According to the Commission's forecasts, growth is expected to stand at 1.6% of GDP in 2016 and 1.8% in 2017 (assuming unchanged policies) in the Eurozone, following a level of 1.7% in 2015, and 1.8% of GDP in 2016 and 1.9% in 2017 in the EU, following a level of 2.0%. The differences between the member states remain considerable. In 2016, growth rates will be highest in Ireland (4.9% of GDP), Romania (4.2%), Malta (4.1%) and Poland (3.7%). The production of wealth will be above the European average in Spain (2.6%), close to the European average in the United Kingdom (1.8%) and Germany (1.6%) and below that average in France (1.3%) and Italy (1.1%). Only Greece is expected still to be in recession in 2016 (-0.3%), before returning to strong growth levels in 2017 (2.7%).
The continued economic upturn in Europe will have beneficial consequences for unemployment, which will continue to fall. In 2016, it is expected to fall from 10.9% in 2015 to 10.3% of the active population in the Eurozone and from 9.4% in 2015 to 8.9% in the EU. “Unfortunately, economic recovery will be accompanied by increased inequalities on the basis of income”, Moscovici observed, stressing that this situation is a “major” socio-economic challenge. He went on to add that “this shows that governments have to work more to make their tax/spending policies not only growth-friendly but also fairer and more inclusive, labour and product market policies that provide equality of opportunity and less rent-seeking behaviour”.
Only four States will have a deficit above 3% of GDP Despite slight expansionary characteristics in 2016, the aggregate government deficits will continue to fall in the Eurozone, from -2.1% in 2015 to -1.9% of GDP in 2016, and in the EU, from -2.4% to -2.1% of GDP. Only four member states will have a deficit in nominal terms above 3% of GDP, the limit laid down by the Stability and Growth Pact, this year: Spain (-3.9%) (EUROPE 11522), France (-3.4%) (see EUROPE 11531), the United Kingdom (-3.4%) and Greece (-3.1%). The Portuguese deficit is expected to come back below the 3% of GDP mark in 2016 (-2.7%) (see EUROPE 11488). In the opposite corner, Luxembourg (+1.0%) and Germany (+0.2%) are expected to continue to experience a budgetary surplus.
Moscovici, who has been called upon several times to comment on these data with regard to the Pact, said that on Wednesday 18 May, the Commission is to present its country-by-country recommendations on the basis of the spring economic forecasts and the national stability and reform programmes submitted to it. “In general, the Commission's forecasts are accurate”, the Commissioner stressed, in reference to the row over the draft Spanish budget for 2016 which broke at the end of last year (see EUROPE 11408). As for France, Moscovici said that the aim of a deficit below 3% of GDP in 2017 was “entirely doable, as long as France sticks determinedly to its course”. Any announcement of tax cuts (ahead of the 2017 presidential elections) “would need to be offset immediately”, he stressed.
The trajectory of the average government debt is expected to continue to fall, from 92.9% to 92.2% of GDP in the Eurozone and from 86.8% to 86.5% of GDP in the EU. Here again, the national differences are considerable. Government debt will exceed 100% of GDP in five Eurozone countries: Greece (182.8% of GDP), Italy (132.7%), Portugal (126.0%), Cyprus (108.9%) and, for the first time, Spain (100.3%). The least indebted countries are Estonia (9.6% of GDP), Luxembourg (22.5%) and Bulgaria (28.1%).
It is worth noting that the forecasts for United Kingdom are based on current policy, in other words the United Kingdom staying in the EU following the British referendum of 23 June. The uncertainty surrounding this referendum on the United Kingdom's membership of the EU constitutes a risk to growth, the Commission stresses. (Original in French by Mathieu Bion with Elodie Lamer)