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Winter 2014 forecast: recovery gaining ground
The steady economic recovery in most Member States and in the EU as a whole will continue, according to the European Commission’s winter forecast of 25 February. After exiting the recession in spring 2013 and posting three consecutive quarters of subdued recovery, the economy is set for a moderate step-up in economic growth. Following real GDP growth of 1.5% in the EU and 1.2% in the euro area in 2014, economic activity is seen accelerating in 2015 to 2.0% and 1.8% respectively. These figures each represent an upward revision of 0.1 percentage points compared with the autumn 2013 forecast. The forecast remains based on the assumption that policy measures agreed at the EU and Member State levels will be smoothly implemented and sustain improvements in confidence and financial conditions, as well as support the necessary economic adjustments by increasing Member States’ growth potential. A modest rise in employment is expected from this year onwards while consumer price inflation is expected to remain subdued. Diminishing uncertainty should underpin stronger demand, which is expected to become the key driver of growth as deleveraging pressures, funding constraints as well as internal and external adjustment needs gradually subside.
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| The worst of the crisis may now be behind us, but this is not an invitation to be complacent, as the recovery is still modest. To make the recovery stronger and create more jobs, we need to stay the course of economic reform. |
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Olli Rehn, Vice-President for Economic and Monetary Affairs and the Euro
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G20 Finance Ministers and Central Bank Governors in Sidney agree to continue with the reforms toward a stronger and balanced economic growth
European Commission Vice-President Olli Rehn participated in the G20 Finance Ministerial and Central Bank Governors' meeting held in Sydney on 22-23 February. Discussions focused on the global economic outlook, including the effects of monetary policy normalisation and the recent financial market volatility in emerging market economies; the objectives for the G20 growth strategies; and the facilitation of conditions for investment in infrastructure. Progress was made to help G20 members develop strong and comprehensive growth strategies for the Brisbane summit. Finance Ministers and Central Bank Governors in Sydney stressed that the level of ambition should be high and that there should be a clear link between the current global macroeconomic challenges, and the policy priorities behind the growth strategies. Other issues discussed were related to the international financial architecture, financial regulation as well as tax avoidance and evasion.
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Deposit guarantee schemes: Council confirms agreement with European Parliament
On 18 February, the Council approved a political agreement reached with the European Parliament that aims to further harmonise EU rules on deposit guarantee schemes (DGSs) and enhance depositor protection. The legislation is designed to protect both depositors and the financial system, in the latter case by preventing bank runs. Based on the Commission proposal of 12 July 2013 that called for a thorough revision of EU rules, the draft directive aims to improve the protection provided to savers. It would, for example, simplify and harmonise rules related to coverage and payout, and further reduce the time limit for paying out depositors from the current 20 working days to seven working days by 2024. Under the agreed directive, all banks will be required to join a DGS so that all their covered deposits are protected. Moreover, DGSs will be continuously supervised and have to perform regular stress tests of their systems. The directive is expected to enter into force this spring after adoption by the Council and the European Parliament. It is the culmination of work begun with publication of the Communication on deposit guarantee schemes in 2006, two years before the onset of the crisis.
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Barroso with Hollande and Merkel at European Roundtable of Industrialists: Franco-German role in industrial renaissance is key
Commission President Barroso met with German Chancellor Angela Merkel and French President François Hollande in Paris on 19 February at a gathering of the European Roundtable of Industrialists. Barroso noted the Franco-German support for the Commission vision of an industrial renaissance in Europe underpinned by concrete objectives and pointed out the link between information technology and industrial competitiveness. He also thanked the two leaders for their support of the EU’s energy-climate package of reforms, calling the reforms both ambitious and realistic. Barroso said that the measures, and particularly the development of an integrated energy market, would reduce energy costs and support the competitiveness of European business. He also mentioned the importance of the Trans-Atlantic Trade and Investment Partnership being negotiated with the US and of addressing unemployment, particularly of youth. Barroso acknowledged efforts by France to boost French competitiveness and by Germany to increase investment, particularly in infrastructure.
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TTIP: EU and US negotiators ready to get into heart of trade negotiations
EU Trade Commissioner Karel De Gucht met with US Trade Representative Michael Froman in Washington, D.C. from 17-18 February to review progress on the Transatlantic Trade and Investment Partnership Agreement (TTIP) negotiations that were launched in July 2013. Following meetings, De Gucht said that the negotiations had made good progress and now needed to step up a gear. The EU and the US exchanged offers on the tariff cuts they are ready to make, and De Gucht emphasised the need to also be ambitious on services and public procurement. He noted that good progress has been made on ensuring that SMEs benefit from the agreement as much as large companies do. De Gucht also underscored that “we are not lowering standards in TTIP.” Instead, he said, the aim is to improve coordination between EU and US regulatory agencies in order to avoid the wasteful duplication of effort or the creation of trade barriers. The next TTIP round will take place on 10-14 March in Brussels, and the TTIP will also be an important agenda item at the EU-US Summit on 26 March.
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Barroso meets Dutch Prime Minister Rutte, calls Netherlands a natural ally in deepening integration
Commission President Barroso met Mark Rutte, Prime Minister of the Netherlands, in Brussels on 13 February. Barroso expressed optimism regarding the Dutch economy, noting that as a very open and dynamic economy at the heart of the EU and its internal market, “the Netherlands is in a good position to benefit from the pick-up that is now underway.” The Commission President also praised recently introduced reforms to the housing market, healthcare, labour market and energy sector, which he said would help to make the Dutch economy more competitive. He noted the importance of agreeing on a Single Resolution Mechanism for banks before the European Parliament elections in May and thanked Rutte for his ongoing support of deeper integration in the euro area. With European elections only three months away, Barroso said that politicians needed to leave their comfort zones and engage in an open and honest debate about the benefits of a more integrated European Union. He called the Netherlands, as a founding member of the EU, a natural ally in this.
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Euro exhibition opens in Rzeszów (Poland)
Building on its success over the last year and a half, the European Commission and the National Bank of Poland have decided to prolong the travelling euro exhibition in Poland for one more year. On 24 February, the exhibition was opened in Rzeszów by Małgorzata Zaleska, Member of the Management Board of the National Bank of Poland (NBP) and Zbigniew Gniatkowski, Deputy Head of the European Commission Representation in Poland. The exhibition takes visitors on the road to the euro around two exhibition areas. After presenting EU countries and the main historic steps which led to the adoption of the euro, it focuses on the Economic and Monetary Union and also addresses topical issues, such as the EU response to the sovereign debt crisis and the new EU economic governance framework. The exhibition will stay in Rzeszów until 4 April 2014 and is scheduled to also go to Gdańsk, Wrocław and Poznań.
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Consolidation on the revenue side and growth-friendly tax structures: an indicator based approach. European Economy. Economic Papers. 513. February 2014. Brussels.
This paper examines the potential need and scope at Member State level for either shifting taxes away from labour or for increasing revenue to help fiscal consolidation. First, the paper identifies which Member States have a particular need to reduce labour taxes (either overall or for specific labour market groups) and identifies low-skilled workers and second-earners as two groups that are particularly responsive to labour supply incentives. The paper also analyses which Member States have room for increasing taxes that are considered to be less distortive for growth, namely consumption, recurrent property and environmental taxes. The analysis shows that around one third of Member States could consider shifting taxation away from labour to other tax bases. A second analysis identifies Member States that might consider using taxation – in addition to expenditure control – to consolidate their public finances and steer them onto a sustainable path.
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| Directorate-General for Economic and Financial Affairs |
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