Brussels, 26/08/2009 (Agence Europe) - Despite encouraging signs, economic recovery is still not strong in Europe. Things, however, have changed as a result of the crisis and, in the longer term, the European economy has to be made more sustainable and more innovative.
“The recent recovery spots are fragile and do not allow for any complacency,” José Manuel Barroso told economists meeting in conference in Barcelona on 25 August. “In any case, it is clear that global growth will not return to pre-crisis levels for some time - if at all,” the Commission President stated. The Commission will present its interim economic forecasts (on growth and inflation) on 14 September. “These growth rates - and the economic model behind them - were simply sustainable. This has been drastically illustrated by recent events,” he added.
In the current context, “it is clearly too early to withdraw support for the economy and the financial sector,” he pointed out. Determining the right moment to do so “requires deep analytical work”, which relies on the quantification of unobserved variables, like potential output and the output gap. This work must, too, be “coordinated at international level, particularly in the G20”, of which the Commission is now a full member, he said.
The priority is to restore growth, but budgetary support cannot go on indefinitely. That was why new sources of growth, built particularly on innovation and green jobs, will have to take up the challenge. In the face of constraints on public finances, the quality of expenditure will also have to improve. “Prioritisation will be paramount,” said Barroso, stating that he believed that there may be a case for extending surveillance under the Stability and Growth Pact to include an assessment of both expenditure and taxation to see whether they are sufficiently growth-friendly. (A.B./transl.rt)