Brussels, 05/05/2009 (Agence Europe) - “The Commission's aim was accurate” when it predicted economic contraction of 4% in 2009. That at any rate is the opinion expressed by the Eurogroup, within which there was generally broad agreement between all member states during the presentation of the latest spring forecasts, on Monday 4 May (EUROPE 9894). According to Eurogroup President Jean-Claude Juncker, these forecasts, “while still very gloomy”, are “a little more optimistic” than those published by the IMF two weeks ago and which had been criticised by several European countries for being over-pessimistic. Although not pointing to real recovery, some recent data light up the prospect of economic activity, Mr Juncker said after the meeting. “We are beginning to see positive signs in the United States, in Asia and in Europe”, Economic and Monetary Affairs Commissioner Joaquín Almunia told the press, although concern is mainly expressed regarding the social impact that the crisis will have.
Call for social responsibility. After the period of net job creation in recent years, unemployment rates are clearly on the rise (in the eurozone, the rate should reach 9.9% in 2009 and 10.4% in 2010, compared to 7.5% in 2007 and 2008). “This could lead us to a substantive debate on the correct articulation of our economic and social model”, Mr Juncker predicted, saying it would be wrong to underestimate the “explosive nature” of the situation. “We are in the middle of an economic and financial crisis, and we are moving towards a social crisis as there will be an employment crisis”. All our efforts must be geared to face up to this, with more active employment policies in particular, and “I have the impression that many politicians underestimate the magnitude of the phenomenon”, he analysed. In this context, the Eurogroup president also deeply regrets that the employment summit on 7 May in Prague is finally being organised in restricted formation (a troika and not a summit of heads of state as initially recommended by the Czech Presidency and the European Commission). The Luxembourg prime minster and finance minister forcefully pointed out: “When one doesn't have any ideas, that doesn't mean one should not deal with the problems”.
No call for additional recovery measures. Although Mr Juncker repeats the call to employers not to carry out premature dismissals, but rather to resort to partial unemployment, he and his counterparts do not see the need at this stage to increase budgetary effort to counter the effects of the current crisis. Despite the “gloomy” economic forecasts, “we do not believe that eurozone and EU member states as such should add new elements to the economic programmes that they have decided and which have just been launched”. The first effects of the recovery measures will be felt towards the end of 2009 and will produce their real impact in 2010, Mr Juncker reiterated. The “considerable” budgetary measures taken by member states are therefore sufficient and “at the present time, we do not see any point in launching new economic programmes in the void”. In order to allow efforts already deployed to fully contribute to recovery and to restoring confidence, it is, however, of prime importance to deal with impaired assets, Mr Juncker and Mr Almunia said, without giving any figures (the IMF recently evaluated at €750 billion the depreciation of impaired assets that eurozone banks may still register by 2010). The track to take to improve the banking sector is in fact left to the discretion of member states (which must simply comply with the guidelines and principles defined by the Commission - see EUROPE 9848).
Preparation for return of public finance consolidation. With the crisis, budgetary balances will continue to worsen and the Commission's estimates are in this respect deemed “credible” by eurozone finance ministers, Mr Juncker said. In the hope that the context over coming months will be more propitious for a return to the effort of budgetary consolidation, their intention is still to define a strategy for coming out of the deficit and over-indebtedness spiral, as “we cannot pass on the burden of today's policies for coming generations to bear”, he stressed. Confirming the upcoming opening of excessive deficit procedures against five member states (Poland, Romania, Lithuania, Latvia and, for the eurozone, Malta), Mr Almunia also announced, for coming months, a number of decisions very much of the same kind as those for countries that did not exceed 3% in 2008 but which predict excessive deficits in 2009 and 2010. From June this year, the Eurogroup will take stock of the medium and long-term prospects for public finances. On this occasion, minsters will begin a discussion on adjusting their budgetary strategies in a way that allows them to reach medium-term objectives (MTO) for returning to balance, which have been postponed everywhere due to the crisis. (A.B./transl.jl)