What's new from ECFIN
October 2007 | Issue 8
‘Of general economic interest’
Network industries such as telecommunications, energy and transport were discussed at a workshop on 10 September 2007 in Brussels. They are important because they provide critical public services on which many other sectors of the economy, and indeed society, depend – and they employ more than 10 million people in the EU. DG ECFIN and the European Economic and Social Committee organised the workshop ‘Evaluation of the performance of network industries providing services of general economic interest’. Increased competition has kept prices down and benefited consumers and business, reported Commissioner Almunia in his keynote speech, but he emphasised that there are marked disparities between Member States and more needs to be done. Other sessions dealt with the impact of reforms in network industries and the methodology used in the evaluation.
October 2007 | Issue 8
Euro roadshow hits Cyprus
DG ECFIN’s travelling exhibition is proving popular: ‘The euro, our currency’ has arrived in Cyprus, after a successful two weeks in Malta which drew around 100 000 visitors. The roadshow, which started off in Brussels, is designed to raise awareness of the single currency among citizens and to answer their questions. Fun is at the heart of this modern, interactive exhibition with touch screens, a quiz and several computer games for school children. Organised in co-operation with the Cypriot Ministry of Finance and Central Bank, the exhibition will open on 22 October and run until 5 November in Limassol. Malta and Cyprus will adopt the euro as their national currency at the beginning of 2008 and the exhibition is part of a broad array of efforts to smooth the changeover.
October 2007 | Issue 8
EU growth steady, despite transatlantic turbulence
Both the EU economy as a whole and the euro area are set to record healthy growth rates this year, albeit slightly lower than expected in the spring, owing to volatility in global financial markets. This was the conclusion of the Commission’s interim forecast released on 11 September 2007. The projections put economic growth for 2007 at 2.8% in the 27 Member States as a whole and 2.5% in the 13-member euro area. This is only 0.1% lower than the figure forecast in the spring. “The sound economic fundamentals of the European economy will help weather the current financial turmoil. But the increased risks to the outlook require governments to hold steady to the reform and budgetary consolidation agenda,” said Commissioner Joaquín Almunia.
October 2007 | Issue 8
Avoiding the rain in Spain
The brilliant performance of the Spanish economy under EMU is dimming and clouds are on the horizon – adjustments may be needed. This was the context for a DG ECFIN seminar in Brussels on 21 September where participants discussed how the imbalances in the Spanish economy can be addressed to ensure a ‘soft landing’. After buoyant growth and remarkable real convergence since the run-up to the euro, Spain now suffers from low productivity growth, external imbalances and a slowing housing sector (which contributed greatly to growth and employment in earlier years).
October 2007 | Issue 8
Weatherproofing the euro area
In its latest Quarterly Report on the Euro Area (QREA), released on 4 October, the Commission warned of the increased downside risks to growth posed by the onset of market turbulence, and discussed in detail the possible impacts on the EU economy for the future. Within the euro area, after five quarters of vigorous growth, GDP growth decelerated in the second quarter of 2007, partly owing to exceptional weather and statistical effects, but also an indication that the business cycle has probably passed its peak. In addition, a focus section of the report considers cross-border risk sharing in the euro area, which is on the rise as financial integration spreads, but notes that progress is slow. A second focus section analyses the resilience of the euro area economy – meaning its ability to weather adverse economic shocks – and notes signs that this is improving in some segments of the economy.
October 2007 | Issue 8
Smoothing Malta’s path to the euro
The euro area is heading south and will embrace Malta and Cyprus on 1 January 2008, bringing the countries using the single currency to 15. To prepare Malta for the euro changeover, DG ECFIN and the Maltese government, together with the ECB, organised a conference entitled ‘Malta on the path to the euro’ which took place on 30 September-1 October in Malta. After hosting a welcome reception, Malta’s Prime Minister and Finance Minister Lawrence Gonzi opened the conference by summarising his country’s journey to the euro, while the central bank govenor, Michael C Bonello, looked to the future, beyond the adoption of the single currency. ECB President Jean-Claude Trichet opened the main session and Commissioner Joaquín Almunia examined the achievements of and challenges facing EMU. Debate for the rest of the day focused on EMU governance and the practical aspects of the changeover.
October 2007 | Issue 8
The EU and China: a shared duty to lead by example
“China and Europe have many similarities,” Joaquín Almunia told his audience at Qinghua University in Beijing on 18 September. “Europe’s 27 Member States must contend with a level of diversity that here in China is well known,” he explained, suggesting that the level of variation of languages and traditions among Chinese regions could be even greater than between the countries of the European Union. “However, we also face similar challenges – both domestic and global,” said the Commissioner, who went on to highlight ageing populations, regional disparities in growth and income, energy and climate change, and the threat of global imbalances in the world economy as the main areas of mutual interest. Sharing knowledge and experience would allow valuable lessons to be drawn by both the EU and China, he said. “We must work together in this respect. A well-functioning global economy is not a zero-sum game, but a win-win situation for China, Europe and the wider world.”
October 2007 | Issue 8
ECFIN annual research conference
DG ECFIN’s annual research conference took place in Brussels on 11-12 October 2007. The assembled experts and policy-makers discussed the issues raised by European monetary union and the introduction of the euro under the banner ‘growth and income distribution in an integrated Europe: does EMU make a difference?’. Speakers included Anthony Atkinson of the UK’s Oxford University, Giuseppe Bertola of Italy’s University of Turin, Cecilia Garcia-Peñalosa of France’s Centre National de la Recherche Scientifique and Robert J Gordon of the US’ Northwestern University. Issues for discussion included how wealth distribution has evolved in Europe, the actual and potential impact of EMU, the links between growth and income distribution, and the design of policies that promote both.
