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Spring 2015 Economic Forecast: Tailwinds support the recovery
Positive economic tailwinds are boosting an otherwise mild cyclical upswing in the EU, according to the European Commission’s Spring 2015 Economic Forecast, which was released on 5 May. As a result, real GDP in 2015 is now expected to rise by 1.8% in the EU and by 1.5% in the euro area, respectively 0.1 and 0.2 percentage points higher than projected three months ago. For 2016, the Commission forecasts growth of 2.1% in the EU and of 1.9% in the euro area. Europe’s economies are benefitting from many supporting factors at once. Oil prices remain relatively low, global growth is steady, the euro has continued to depreciate, and economic policies in the EU are supportive. On the monetary side, quantitative easing by the European Central Bank is contributing to lower interest rates and expectations of improving credit conditions, while fiscal policy is also accommodating growth. Domestic demand is the main contributor to GDP growth, with an acceleration of private consumption expected this year and a rebound of investment next year. Over time, the pursuit of structural reforms and the Investment Plan for Europe should also bear fruit.
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The European economy is enjoying its brightest spring in several years, with the upturn supported by both external factors and policy measures that are beginning to bear fruit. But more needs to be done to ensure this recovery is more than a seasonal phenomenon.
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Pierre Moscovici, Commissioner responsible for Economic and Financial Affairs, Taxation and Customs
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Ireland: Post-programme surveillance mission finds country making a strong rebound
Staff from the European Commission, in liaison with staff from the European Central Bank, visited Ireland to carry out the third post-programme surveillance (PPS) mission from 27 April to 1 May. This was coordinated with the International Monetary Fund’s third post-programme monitoring mission, and the European Stability Mechanism also participated in the meetings on aspects related to its Early Warning System. In 2014 Ireland became the fastest growing EU country as real GDP surged by 4.8%. Public finances also improved in 2014. The general government deficit was 4.1% of GDP, well within the ceiling of 5.1% of GDP recommended under the Excessive Deficit Procedure. Overall, progress towards rebalancing the Irish economy has continued, as reflected in the strong rebound of economic growth. Nonetheless, the legacies of the crisis demand continued policy efforts, particularly in the areas of fiscal adjustment, financial sector repair and restructuring. The next PPS mission will take place in the autumn of 2015.
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A Digital Single Market for Europe: Commission sets out 16 initiatives to make it happen
The European Commission unveiled detailed plans on 6 May to create a Digital Single Market, thereby delivering on one of its top priorities. The aim of the Digital Single Market is to tear down regulatory walls and finally move from 28 national markets to a single one. A fully functional Digital Single Market could contribute EUR 415 billion per year to the EU economy and create hundreds of thousands of new jobs. The Digital Single Market Strategy includes a set of 16 actions to be delivered by the end of next year. It is seeks to improve access for consumers and businesses to digital goods and services across Europe; create the right conditions and a level playing field for digital networks and innovative services to flourish; and to maximise the growth potential of the digital economy.
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Latest Eurobarometer survey shows a majority in four newer EU countries want the euro
Support for the euro varies greatly among citizens in the seven non-euro area countries. This is the result of the latest Eurobarometer survey, which was carried out from 20 to 22 April in the seven EU Member States that have yet to adopt the euro: Bulgaria, the Czech Republic, Croatia, Hungary, Poland, Romania and Sweden. Published on 8 May, the report shows overall support in these countries for the euro stands at 49%, while 48% are against introducing the common currency in their own country. However, a majority of citizens interviewed in four countries want the euro: Romanian citizens at 68% have the most positive attitude, followed by Hungary (60%), Bulgaria (55%) and Croatia (53%). By contrast, only 29% of Czech and 32% of Swedish citizens were in favour of changing to the euro, followed by Poland with 44% in favour and 53% against. Although an overall 51% of respondents think the euro has a positive impact in the countries already using it, 53% expect negative consequences for their own country once the euro is adopted. Asked whether their country was ready for the euro, an overall 79% did not think so, ranging from 69% in Romania to 76% in Sweden and 86% in Poland. Yet asked whether they would personally manage to adapt to the new currency, 81% of citizens said they would, ranging from 69% in Romania, to 76% in Sweden and 86% in Poland.
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April 2015: Economic Sentiment broadly unchanged in both the euro area and the EU; Business Climate Indicator improves slightly
In April, after three consecutive months of improved readings, the Economic Sentiment Indicator (ESI) remained broadly unchanged in both the euro area (-0.2 points to 103.7) and the EU (+0.3 points to 106.4). The stabilisation of euro area sentiment resulted from increasing confidence in the services sector being offset by opposite developments in the construction sector and among consumers. Amongst the largest euro-area economies, Spain (+1.3) and the Netherlands (+0.9) saw economic sentiment improving, whereas it declined in France (-1.4) and Germany (-0.6) and remained unchanged in Italy. In the EU, the two largest economies outside the euro area, the UK and Poland, sent comparatively positive signals (+2.0 and +1.3, respectively) while from a sector perspective, developments in industry, consumer, services and financial services confidence paralleled euro-area trends, while in contrast confidence in retail trade dropped somewhat and rallied in construction. In April 2015 the Business Climate Indicator (BCI) for the euro area increased slightly (by 0.09 points to +0.32).
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Vice-President Dombrovskis visits Belgium and Malta to discuss the European Semester and reforms underway
Valdis Dombrovskis, Vice-President for the Euro and Social Dialogue, met with Belgian authorities and social partners on 30 April to discuss the European Semester and the reforms underway in the country. He met the federal, regional and community Ministers of Finance and the Budget, the new Governor of the National Bank of Belgium, Mr. Jan Smets, and social partners represented in the National Labour Council and the Central Economic Council. Vice-President Dombrovskis then visited Malta on 7-8 May where he met with the Prime Minister, the Deputy Prime Minister, Finance Minister and the Minister for Social Dialogue, as well as members of the House of Representatives, social partners and NGOs. Dombrovskis is travelling to Member States as part of the Commission’s outreach on the European Semester, which is based on the Commission’s Country Reports of February that assessed Member States’ fiscal, economic and social developments. The purpose of the visits is to engage national authorities and social partners in a constructive dialogue on the issues raised in the reports.
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Investment Plan for Europe: Vice-President Katainen takes road show to Luxembourg, Denmark and Sweden
European Commission Vice-President Jyrki Katainen, responsible for Jobs, Growth, Investment and Competitiveness, visited Luxembourg on 27 April as part of his road show to promote the Investment Plan for Europe. Vice-President Katainen met with Prime Minister Xavier Bettel, the Committees of Economic Affairs and Foreign and European Affairs at the national parliament as well as European Investment Bank (EIB) President Werner Hoyer. On May 7, Vice-President Katainen and Commissioner Vestager, responsible for Competition, visited Denmark where they met with Morten Østergaard, Minister for Economic Affairs and the Interior, and Henrik Sass Larsen, Minister for Business and Growth, as well as members of the Danish Parliament, industry and trade unions. Katainen held similar meetings during his visit to Sweden on 8 May, where he was joined by Commissioner Malmström, responsible for Trade. Vice-President Katainen is meeting Heads and Members of Government, business leaders, SMEs, investors and students as part of the 28-country road show to promote and explain the EUR 315 billion Investment plan. The road show can be followed in detail on Twitter.
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China's reforms: Time to walk the talk. Economic Brief 41.
China's economy is at a crossroads. The factors that have driven its economic transformation over the last decades are waning and the country faces increasingly urgent environmental and social pressures. To avoid falling into the ‘middle-income’ trap, China’s leaders are attempting to engineer a reorientation of the economy towards more sustainable sources of growth. This paper examines what China’s leaders need to do to complete the transition and prove that they can ‘walk the talk’. It argues that by introducing additional measures in the areas of social safety nets, the quality of investment, wages, services and the financial sector, China would be better equipped for the daunting challenges that lie ahead.
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EU Economic Forecast - Spring 2015
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The European Commission has released its Spring Forecast. The report tries to predict the following two years of economic activity so as to guide policy makers, business leaders and other interested groups in their decision-making. This involves taking into account around 180 variables and receiving information from DG ECFIN country experts. These Forecasts are produced three times a year in winter, spring, and autumn. This week’s Graph of the Week summarises some of the forecast’s results.
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Directorate-General for Economic and Financial Affairs
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