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Spring forecast © Thinkstock.com EU interim forecast: Recovery slowing down amid financial market crisis
- Troika mission returns to Greece
- Commission proposes better financial terms for EU loans to Ireland and Portugal
- 2011 Report on Public Finances: sustainability of public finances in the spotlight again
- Commissioner Rehn participates in G7 Finance Ministers and G8 Deauville Partnership Finance Ministers meetings
- Results of third Review Mission show Ireland well on track
- Review mission to Portugal delivers positive assessment
- Commission President Barroso lays out EU priorities for the autumn
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Spring forecast © Thinkstock.com EU interim forecast: Recovery slowing down amid financial market crisis

In its latest interim forecast published on
15 September, the Commission presented its assessment of economic prospects in the euro area and the EU for 2011. Economic growth in the EU is slowing down. After growing strongly in the first quarter of 2011, GDP expanded less in the second quarter.
GDP growth is now expected to remain subdued in the second half of the year, coming close to standstill by year’s end. Growth forecasts for the second half of the year have been revised down considerably, by ½ percentage point for the euro area as well as the EU compared to the Commission's spring forecast. This will not result in a double-dip recession, however. Moreover, on account of the stronger-than-expected performance in the first quarter, annual growth is still projected at 1.6% in the euro area and 1.7% in the EU. However, the current outlook is uncertain, and the balance of risks to this forecast is to the downside.

Viewpoint
"
To get the recovery back on track, it is crucial to safeguard financial stability and put budgets on a path that is sustainable beyond doubt.

Olli Rehn, European Commissioner for Monetary and Financial Affairs
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Acropolis, Greece © IStockphoto.com
Troika mission returns to Greece

Staff of the European Commission has returned to Athens to continue technical discussions with the Greek authorities regarding their ongoing work. The review mission by the Commission/ECB/IMF could be concluded by the end of September. A positive assessment of compliance with the programme conditionality by the Eurogroup could allow for
the 6th disbursement under the Greek Loan Facility Arrangement to take place later in October.

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© European Union, 2011
Commission proposes better financial terms for EU loans to Ireland and Portugal

A proposal was adopted by the European Commission on 14 September, suggesting reduced interest rate margins and extended maturities for loans granted by the European Union (EU) to Ireland and Portugal. The loans are provided by the EU under the European Financial Stabilisation Mechanism (EFSM) as part of financial assistance packages to the two countries. The improved terms are expected to enhance liquidity and contribute to the sustainability of both countries in support of their strong economic and reform programmes. On the same day, the Commission also issued under the EFSM a €5 billion 10y bond to finance a further loan to Portugal. Its successful placement and solid investor interest demonstrated the confidence of markets in the euro area.


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Report © IStockphoto.com
2011 Report on Public Finances: sustainability of public finances
in the spotlight again


The 2011 Report on Public Finances, which was published on 9 September, returns the focus to the long-term sustainability of public finances. The report reviews how Member States’ fiscal policies have evolved in the wake of the financial and economic crisis, and assesses the prospects for public finances and the policy needs ahead. It contains an in-depth presentation of the EU’s reform package for improved fiscal surveillance and confirms the idea that alongside the level of the deficit and debt, a higher quality of fiscal rules is linked with a lower yield spread. The report’s analysis shows that EU countries are currently making historically large fiscal consolidation efforts, and highlights the large cost, in terms of lower future GDP, of consolidating public finances via increased taxation.

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G8 and EU flags © IStockphoto.com
Commissioner Rehn participates in G7 Finance Ministers and G8 Deauville Partnership Finance Ministers meetings

Commissioner Rehn participated in the meetings held in Marseille on 9-10 September.
G7 Ministers notably discussed the current macroeconomic and financial situation and the policy response. The G8 Deauville Partnership Ministers launched the economic pillar of the new partnership to support the economic and political transition in the Southern Mediterranean region. The Partnership, which was created by leaders in May in the wake of the Arab Spring, now includes the G8 members, four countries in transition: Egypt, Jordan, Morocco and Tunisia, as well as Kuwait, Qatar, Saudi Arabia, Turkey and the United Arab Emirates (UAE), together with nine international and regional financial institutions.
They confirmed overall support of $38 billion from multilateral development banks available to Egypt, Tunisia, Morocco and Jordan in 2011-2013. This nearly doubles the Deauville commitment.

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High speed train © IStockphoto.com
Results of third Review Mission show Ireland well on track

The European Commission has completed the third review of the EU/IMF supported financial assistance programme for Ireland. The joint European Commission/ECB/IMF mission was in Dublin from 6-15 July. The mission concluded that important progress has been made in the areas of fiscal consolidation, strengthening of the domestic financial sector and growth-enhancing structural reforms. The third instalment of €5.5 billion is scheduled for disbursement to Ireland in two tranches, by end-September and end-October.
Review results showed a gradual return to positive growth in 2011 driven by strong exports aided by improving competitiveness. The mission for the next programme review is scheduled for October 2011.

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Portugal flag © Thinkstock.com
Review mission to Portugal delivers positive assessment

A joint EC/ECB/IMF mission met with the Portuguese authorities in Lisbon
from 1 to 12 August. Assessing compliance with the terms and conditions of the First Review under Portugal’s Economic Adjustment Programme, the joint assessment of the three institutions was that the programme is on track. They commended the new government that took office on 21 June for reacting quickly to avoid an emerging shortfall in public finances and for moving ahead with important structural reforms. The government’s programme is supported by loans from the EU amounting to EUR 52 billion and a EUR 26 billion Extended Fund Facility with the IMF. Following approval of the conclusion of this review by the Council on 2 September, disbursement of EUR 11.5 billion (EUR 7.6 billion by the EU,
and EUR 3.9 billion by the IMF) is now scheduled for September.

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President Barroso's video message on the priorities for the autumn © European Union, 2011
Commission President Barroso lays out EU priorities for the autumn

Addressing a plenary session of the European Parliament on 14 September, President Barroso called economic measures needed to respond to the turmoil in the euro area and on global markets “the most serious challenge of a generation”. He called on euro-area Member euro area Member States to enact the agreement reached on 21 July. Barroso also urged parliamentarians to adopt the Commission’s proposed measures on reinforced economic governance “as a matter of urgency”. Describing competitiveness imbalances as a leading cause of Europe’s economic woes, he said that Europe must correct excessive deficits and debts, and that growth is the key to future prosperity. As additional steps to ensure sound financial markets, Barroso said that the Commission would soon propose further proposals including a Financial Transaction Tax. He concluded with an appeal for political determination and economic discipline, saying that deeper integration is part of the solution.
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Publications
Labour market developments in Europe, 2011© European Union, 2011

Labour market developments in Europe, 2011

This report analyses labour market developments in Europe during the initial phase of the recovery from the major recession that followed the financial crisis. While growth resumed in 2010 in most EU countries, employment lagged behind. Youth unemployment has reached record highs, and unemployment disparities within the EU and the euro area have grown markedly. Moreover, the most recent trends and projections indicate that divergences in unemployment rates are likely to persist and possibly worsen in the coming years. Unemployment duration has also increased as a result of persistently low job creation and matching. According to the report, major challenges going forward will be preventing unemployment from becoming entrenched, maintaining high activity rates, and fighting precariousness and job insecurity. The report also analyses other issues of current relevance such as reforming unemployment benefit systems, wages, competitiveness and macroeconomic imbalances.


Product market review 2010 – 2011
Global currencies for tomorrow: A European perspective, Economic Paper 444
 
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Agenda Calls
16-17 September
Wroclaw, Poland
Informal ECOFIN meeting
22 September
Washington, D.C.
G20 Finance ministers deputies meeting
24-25 September
Washington D.C.
World Bank Group and IMF Annual meeting
26-29 September
Strasbourg
European Parliament Plenary
3-4 October
Luxembourg
Eurogroup/ECOFIN meetings
6-7 October
Brussels
European SME week summit
14-15 October
Paris
G20 Finance ministers deputies meeting
17-18 October
Brussels, Belgium
European Council
3-4 November
Cannes, France
G20 Summit
7-8 November
Brussels, Belgium
Eurogroup/ECOFIN meetings
21 November
Brussels, Belgium
DG ECFIN Annual Research Conference 2011 - New growth models for Europe
29-30 November
Brussels, Belgium
Eurogroup/ECOFIN meetings
9 December
Brussels, Belgium
European Council
Framework contract "Financial data supply services – annual accounts Deadline: 19 September
Call for papers: "EU balance-of-payments assistance for Latvia: Foundations of Success" (working title).
Deadline: 31 January 2012
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Directorate-General for Economic and Financial Affairs