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Autumn 2013 economic forecast: Gradual recovery, external risks
In recent months, there have been encouraging signs that an economic recovery is underway in Europe. After contracting up to the first quarter of 2013, the European economy started to grow again in the second quarter and real GDP is set to continue growing in the remainder of this year. According to the autumn forecast released on 5 November, growth in the second half of 2013 is expected at 0.5 % compared to the same period in 2012 in the EU. On an annual basis, real GDP growth this year is estimated at 0.0 % in the EU and -0.4 % in the euro area. Looking ahead, economic growth is forecast to gradually gather pace over the forecast horizon, to 1.4 % in the EU and 1.1 % the euro area in 2014, reaching 1.9 % and 1.7 % in 2015, respectively. Internal and external adjustment in Europe is continuing, underpinned in many cases by significant structural reforms and fiscal consolidation implemented in recent years. This has improved the conditions for domestic demand to gradually become the main engine of growth in Europe. However, against the background of a weakened outlook for emerging market economies, the return to solid growth will be a gradual process.
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There are increasing signs that the European economy has reached a turning point. The fiscal consolidation and structural reforms undertaken in Europe have created the basis for recovery. But it is too early to declare victory: unemployment remains at unacceptably high levels. That’s why we must continue working to modernise the European economy, for sustainable growth and job creation. |
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Olli Rehn, Commission Vice-President responsible for Economic and Monetary Affairs and the Euro
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EU leaders call for economic governance to strengthen further
At the European Council from 24-25 October in Brussels, EU heads of state or government underscored that the coordination of economic policies should be further strengthened, in order to promote strong, sustainable and inclusive growth in the euro area. Building on recent achievements leaders emphasised the need to increase the level of commitment, ownership and implementation of economic policies and reforms in euro area countries, underpinned by democratic legitimacy and accountability in making and implementing decisions. They said that closer coordination of economic policies should focus on policy areas where positive effects on competitiveness, employment, and the functioning of the Economic and Monetary Union (EMU) are most prominent. Leaders plan to follow up at the December summit with decisions on contractual arrangements and on associated solidarity mechanisms. The October Council welcomed the European Commission’s Communication on the social dimension of EMU of 2 October and reiterated the importance of employment and social developments within the European Semester.
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European Council urges a coordinated European approach on preparing for the ECB’s upcoming assessment of banks
The European Council welcomed the final adoption on 15 October by the Council of the Single Supervisory Mechanism (SSM), the first step towards a banking union for the euro area. In this context, Member States taking part in the SSM should, as a matter of urgency, establish a coordinated European approach in preparation for the comprehensive assessment of credit institutions by the European Central Bank (ECB). EU leaders also called on the Eurogroup to finalise guidelines for direct bank recapitalisation through the European Stability Mechanism (ESM) once the SSM is up and running. They pledged their commitment to reach a general Council approach on the Commission’s proposal for a Single Resolution Mechanism (SRM) by year’s end, so that it can be adopted during the current legislative period.
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Commission adopts ambitious Work Programme for 2014
The Commission’s Work Programme adopted on 22 October for the coming year focuses on results. "2014 will be a year of delivery and implementation", President Barroso said." The programme identifies the key growth-enhancing proposals to be completed in the months ahead, including completion of the banking union, the single market and the digital agenda. Growth and jobs remain the Commission’s top priority in 2014, with an emphasis on combating youth unemployment and facilitating SMEs’ access to financing. Completing the banking union is in line with the Blueprint for a deep and genuine Economic and Monetary Union, which also entails reinforcing economic governance. In terms of external action, key areas include the trade agenda, notably negotiations on a Transatlantic Trade and Investment Partnership with the US, and important international negotiations, such as on climate change and development. The final EU budget for 2014 hinges on the outcome of ongoing conciliation talks between the Parliament and the Council.
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Task Force for Greece issues fifth quarterly report, finds improvements in Greece’s use of EU Structural and Cohesion funds
The fifth quarterly report for the Task Force for Greece (TFGR) for the period April-October 2013 pointed to a “broadening and deepening” of the technical assistance provided by the Task Force, which supports the Greek authorities in implementing the economic reforms linked to country’s financial assistance programme. Published on 22 October, the report found that there was a “striking” improvement in Greece’s absorption of EU Structural and Cohesion funds, as well as “good progress” in unlocking infrastructure investments -- with work on four large motorways that had been delayed by the crisis soon to restart. Looking to the challenges ahead, the Task Force said that technical assistance will be particularly important in improving the functioning of tax administration; building a public administration that better serves the needs of citizens and businesses; and helping create a supportive and predictable business climate.
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ECB unveils details of comprehensive assessment for euro area banks in advance of supervisory role
The ECB on 24 October announced details of the comprehensive assessment to be conducted for 128 euro area banks, as it prepares to take up its role as the euro area’s single banking supervisor next year. The assessment marks an important step in the preparation of the Single Supervisory Mechanism (SSM) and, more generally, towards greater transparency of banks’ balance sheets and consistency of supervision in Europe. The exercise will consist of three elements: a supervisory risk assessment to review key risks, including liquidity, leverage and funding; an asset quality review (AQR) to enhance the risk of bank exposures by examining the quality of their assets; and a stress test to determine the resilience of banks’ balance sheets to stress scenarios. In the first health check, banks will be judged according to a Common Equity Tier 1 capital ratio of 8%, drawing on the definition in the EU’s Capital Requirements Directive IV (CRDIV). Details about the stress test will be announced later, in coordination with the European Banking Authority (EBA).
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EU and China conclude fourth High Level Economic and Trade Dialogue
The EU and China held their fourth High Level Economic and Trade Dialogue (HED) on 24 October in Brussels. The overarching theme of the meeting was how the EU and China can address challenges and create opportunities through open economies and cooperation, at a time when both sides are in the midst of serious economic reforms. A broad and ambitious agenda with a range of economic and trade issues highlighted the importance of bilateral cooperation and provided an opportunity to intensify it. There was a strong political commitment to ensure the HED continues as a forum for strategic discussion that sets the direction for future engagement, as well as a mechanism to manage cooperation and competition between the two economies. Topics addressed during the meeting include: the international economy and major developments within both economies; future sources of growth; trade and investment; industrial policy and technological cooperation; and customs cooperation.
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Euro news “Real Economy” TV programme looks at banking union
Building a banking union is at the top of the Commission's agenda – and the subject of the latest (5 November) episode of “Real Economy” on the Euronews television channel. The programme addresses questions such as “What is a banking union?” and “How do we shore up banks?”, with UK MEP Sharon Bowles, chair of the European Parliament's Economic and Monetary Affairs Committee, sharing her expertise as the main interviewee. The series is designed to bring the complexities of EU economic matters closer to a daily audience of 6.5 million viewers. Every other Tuesday, a new episode premieres at 10.45 a.m. CET, and is repeated 12 times throughout the week. “Real Economy” can also be followed online – live or on demand - with the next episode on "Innovation and Growth in Europe’s Regions" scheduled for 19 November.
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Euro exhibition opens in Daugavpils, Latvia
After a first successful stop in Riga, the European Commission's travelling euro exhibition has arrived in Daugavpils (Latvia). It aims to inform Latvians about their new currency and support the counry’s preparations for the changeover to the euro on 1 January 2014. The exhibition opened on 22 October with a ceremony attended by Inna Steinbuka, Head of the Commission Representation in Latvia, Arina Andreičika, Head of the Euro Office of the Latvian Ministry of Finance, and Jānis Lāčplēsis, mayor of Daugavpils. The exhibition takes visitors on the road to the euro around two main exhibition areas. After presenting EU countries and the main steps that led to the adoption of the euro, it focuses on the Economic and Monetary Union, and addresses topical issues such as the EU response to the sovereign debt crisis and the new EU economic governance framework. A dedicated exhibition area provides information specifically for children. The exhibition will run in Daugavpils until 29 November before heading to Liepaja (02/12-12/01).
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Labour market developments in Europe, 2013. European Economy 6/2013
The report finds that after four years of deteriorating labour market outcomes, the first signs of stabilisation in EU unemployment are emerging within the context of GDP growth turning positive, improving sentiment and recent reforms. Major labour market disparities persist across the EU and the euro area. A wider dispersion in unemployment rates across the EU and the euro area largely reflects differences in the intensity of the rebalancing and deleveraging process. In view of the high and persistent unemployment rates in most EU countries, the report digs deeper into the analysis of cyclical versus structural unemployment in the EU. It reasons that policy responses across the board for the EU or the euro area would work only to a certain extent, since the magnitude and typology of challenges are largely country-specific.
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