Brussels, 25/04/2001 (Agence Europe) - On Wednesday, the European Commission published its spring economic forecasts (period 2001-2002), which announce growth of 2.8% of GDP for the euro-zone and for the EU as a whole in 2001. This growth, which continues to be one of the largest recorded in recent years, would go hand in hand with a fall in the rate of unemployment and controlled inflation, which hints at the limited effect that the US downturn would have on the European economy. In a press release, the European Executive attributes downward revision of its most recent forecasts, which were 3.2% last autumn, to the "rise in oil prices" and to the "sudden deceleration of the US economy". The Commission is tabling on growth recovery from the second half of the year on, to reach 2.9% in 2002. It concludes that the impact of the American economic slowdown should remain limited, thanks to the persisting strong domestic demand. Most EU Member States see their activity slowing down because of the external environment, with strong differences between the large economies. Germany, with an average growth rate of 2.2%, should be the slowest in the euro-zone in 2001. Italy manages a little better with 2.5%, while France has a stronger performance with 2.9%. Denmark, with just 2.1%, is the lowest, while Ireland continues to ride high above the others with 7.5%, although this cannot conceal a fall of 3.2% since the year 2000.
Commissioner Pedro Solbes, responsible for economic and monetary affairs, declared he was "moderately optimistic" and considered that growth in the EU and euro-zone should remain robust and slightly above the potential trend of 2.8% in 2001. Trends have changed drastically since the autumn forecasts as, at the time, "our only concern was the fall in oil prices", Mr Solbes told the press, before going on to say that "now, our main concern is the American slowdown". In his view, the European economy would be slightly affected, mainly with respect to trade. The construction sector would be the best protected. The Commissioner, who is tabling on growth picking up again in the United States, going from 1.6% in 2001 to 3% in 2002 according to a V-shaped scenario, cited Germany and Ireland among the countries most affected by the American slowdown. Private consumption and the creation of jobs are, he believes, the main factors supporting growth. It is his opinion that 3.8 million jobs will be created in the EU during this period and that the rate of unemployment will fall from 8.3% in 2000 to 7.2% in 2002. The number of unemployed persons would also fall to 12.6 million, as opposed to 15.7 million in 1999. France, Greece and Spain will record the largest reductions in the numbers of unemployed. Despite the fall in unemployment, Pedro Solbes continued to urge in favour of wage moderation, which he described as a "paying strategy in terms of job creation". Inflation would remain at 2.2%, a figure above the 2% objective targeted by the European Central Bank. After an upward trend during the second half of the year, as a counter-blow to the oil crisis and the foot-and-mouth epizootic, inflation should fall to 1.8% in 2002.
Public finances continue to improve in most Member States. This year, with a much smaller contribution from UMTS license sales, the government surplus is forecast to turn again into a deficit of 0.2% of GDP for the EU as a whole, whereas receipts for the year 2000 had general government balances jump from a deficit of 0.6% of GDP in 1999 to a surplus of 1.2% in 2000. The Commission considers that the average budgetary situation should be close to balance this year, but deplores the slightly expansionist orientation that it explains by tax cuts decided in Germany and in the Netherlands and the easing of budgetary policy in certain countries, such as the United Kingdom. In 2001, 5 Member States are expected to be in deficit (Germany, France, Italy, Austria and Portugal). The European Commission acknowledges in a press release that the outlook for the EU remains uncertain and that the "relatively benign outlook for the EU is not assured" given that: 1) the US economy may take longer to overcome the present downturn in activity because consumers reassess their financial position; 2) the "transmission mechanism" may involve not only trade effects but also exchange rate and share price volatility; 3) domestic demand growth in the EU may be affected by the continued inflation or the negative confidence.