BRUSSELS: The EU sharply cut its growth forecasts for the eurozone on yesterday, warning that France and Italy remain huge problems for the sluggish European economy that is becoming a worry worldwide.
The threat of deflation and recession combined with stubbornly high unemployment across the 18-country eurozone loomed large in the European Commission’s autumn economic forecasts.
In a grim set of numbers, it cut its 2014 growth prediction for the 18-country area to just 0.8 percent from the previous 1.2 percent, then predicting expansions of 1.1 percent in 2015 and 1.7 percent in 2016.
EU officials called for urgent investment to boost jobs and growth, amid fears that just two years after its last debt crisis, the eurozone could again destabilise the global economy as a whole.
“The economic and employment situation is not improving fast enough,” said Jyrki Katainen, the commission’s new vice president for jobs and growth, as he announced the bleak figures.
With years of austerity failing to reanimate the eurozone, new European Commission president Jean-Claude Juncker has promised to unveil a €300bn ($380bn) investment plan for the eurozone by Christmas.
But despite apparently avoiding a so-called “triple-dip” recession, the eurozone headwinds on the world economy have caused turmoil on global stock markets in recent weeks.
Pierre Moscovici, the new commissioner for economic affairs, warned that there would also be hard work ahead to both bring in investment and for eurozone nations to bring in structural reforms.
“There is no magic bullet, there is no simple answer,” Moscovici told the same press conference.
Also haunting Europe is the danger of deflation, and while the commission believes prices will not fall outright, it said inflation will remain very low and also drag on growth.
The commission said inflation in the eurozone this year would sink to a “very low” 0.5 percent and rise only to 0.8 percent next year — both way off the European Central Bank target of just under two percent.
Unemployment in the eurozone, already sky high in several crisis-hit countries, will remain a huge problem in the next few years, it said. The rate would slip to 10.2 percent in 2016, still above pre-crisis levels and with Spain and Greece both at 22 percent.
Germany emerges as a worry from the EU figures, with the economy, normally seen as the growth engine for the continent, set to expand by a sluggish 1.3 percent in 2014 and just 1.1 percent next year. AFP
