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Winter forecast 2013: EU economy gradually overcoming headwinds
Economic activity was disappointing in the second half of 2012, but leading indicators suggest that GDP in the EU is now bottoming out, and economic activity is expected to gradually accelerate. According to the EU winter forecast issued on 22 February, the pick-up in growth will initially be driven by increasing external demand, with domestic investment and consumption projected to recover later in the year and become the main drivers of GDP growth by 2014. The forecast projects low annual GDP growth of 0.1% for 2013 in the EU and a contraction of -0.3% in the euro area. Unemployment rates are expected to increase further this year to 11% in the EU and 12% in the euro area. The sizeable fiscal measures that Member States are implementing should lead to another reduction of headline fiscal deficits to 3.4% in the EU and 2.8% in the euro area in 2013, thereby helping to contain the rise in debt-to-GDP levels. De-leveraging continues to weigh on short-term growth, but as this process advances it will strengthen the basis for growth in 2014, which is projected at 1.6% in the EU and 1.4% in the euro area.
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The decisive policy action undertaken recently is paving the way for a return to recovery. We must stay the course of reform and avoid any loss of momentum, which could undermine the turnaround in confidence that is underway, delaying the needed upswing in growth and job creation.
Olli Rehn, Commission Vice-President for Economic and Monetary Affairs and the Euro. |
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EU reaches agreement on “two pack” for strengthening budgetary surveillance and promoting further economic integration
The European Parliament, the Council and the Commission reached agreement on 20 February on two pieces of EU economic governance legislation – the “two pack” – that will further strengthen EU economic surveillance mechanisms and promote continued economic integration and convergence in the euro area. Augmenting the first set of EU economic governance reforms in force since December 2011, the first Regulation will require euro area Member States to present their draft budgets at the same time each year. It will give the Commission the right to assess and, if necessary, issue an opinion on them potentially requiring that they be revised. The second Regulation will give the Commission the power to decide whether a Member State experiencing severe financial difficulties should be subject to enhanced surveillance. The agreement paves the way for completion of the legislative process and the rapid entry into force of the two Regulations. Once the two-pack is adopted, the Commission intends to take steps towards a deep and genuine EMU as outlined in the blueprint published last year. Chief among these could, under certain rigorous conditions, eventually be the partial substitution of national issuance of debt by joint issuance in the form of a redemption fund and euro bills. The Commission will establish an expert group to analyse the issue in depth by March 2014.
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G20 Finance Ministers and Central Bank Governors in Moscow agree to put in place credible medium-term fiscal consolidation plans
European Commission Vice-President Olli Rehn participated in the G20 Finance Ministerial and Central Bank Governors' meeting held in Moscow on 16 February. This was the first such meeting under the Russian G20 Presidency. Discussions focused on the global economic situation and the actions needed to strengthen the recovery. There was general recognition that Europe's anti-crisis actions have helped reduce tail risks to the global economy. G20 Ministers and Central Bank Governors also discussed issues related to the international financial architecture, financial regulation, and energy and commodities markets. Russia put two new priority issues on the table: the improved use of investment financing as a tool to promote growth, and the enhancement of public debt management. Ministers agreed to put in place credible medium-term fiscal consolidation plans, taking into account near-term economic conditions and fiscal space. Work will continue on developing credible medium-term fiscal targets in line with the commitments made by G20 Leaders in Los Cabos in June 2012. The next G20 Finance Ministerial meeting will take place on 18-19 April 2013 in Washington.
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Euro area posts international trade in goods surplus of EUR 81.8 billion in 2012
The euro area posted an international trade in goods surplus in 2012 of EUR 81.8 billion compared with a deficit of EUR 15.7 billion in 2011. The estimate released on 15 February by Eurostat, the EU’s statistical office, shows a positive euro area trade in goods balance with the rest of the world in December 2012 of EUR 11.7 billion, compared with +8.0 billion in December 2011. In December 2012 compared with November 2012, seasonally adjusted exports fell by 1.8% and imports fell by 3.0%. The EU’s external trade in goods balance is estimated to have widened in December 2012 to a EUR 0.7 billion deficit, compared with a deficit of 0.2 billion in December 2011. The EU deficit decreased slightly in 2012 to EUR 104.6 billion, compared with EUR 162.7 billion in 2011.
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Social investment: Commission urges Member States to focus on growth and social cohesion
The European Commission has called on Member States to place greater emphasis on social investment and to modernise their welfare states. This means better performing active inclusion strategies and a more efficient and more effective use of social budgets. The call features in a Communication on Social Investment for Growth and Cohesion adopted by the Commission on 20 February. The Communication also offers guidance to Member States on how best to use EU financial support, notably from the European Social Fund, to implement the outlined objectives. The Commission will closely monitor the performance of individual Member States’ social protection systems through the European Semester and formulate, where necessary, Country Specific Recommendations.
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Commission spells out how cohesion funds can help regional recovery in Western Greece
The European Commission has outlined ways in which cohesion funds can help regional recovery in Western Greece. The Commission noted that EU Regional Policy must be in absolute alignment with the Europe 2020 growth agenda and the focusing on small and medium-sized enterprises (SMEs) – strengthening them, creating new ones and forging links with universities. A major deficiency in Europe, according to the Commission, is that spending on research does not always transfer into concrete business applications. For this reason, the Commission is promoting a much closer cooperation with Horizon 2020 EU research and development funds in the next financial period. Governance also needs to be improved by increasing transparency. In general, regional policy should be understood as investment policy, Commissioner for Regional Policy, Johannes Hahn, stressed in his speech.
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European prosperity reloaded: an optimistic glance at EMU@20
Amidst current fears of recession and economic stagnation, this research note presents an optimistic view of the euro area’s prospects over the medium-term. The authors claim that the euro area has a good chance of leaving the crisis behind in a much stronger overall position than before, and that it will emerge in a stronger position than international competitors such as the US and Japan. Deep reforms at the national and euro area level, including the establishment of a banking union, will enhance economic efficiency, while Europe’s well-developed social systems will support economic stability and sustained growth. Furthermore, by staying the course on fiscal consolidation, the euro area will generate the fiscal space to tackle new challenges and enable automatic stabilisers to work; this is a task yet to be addressed in other advanced economies.
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| Directorate-General for Economic and Financial Affairs |
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