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Europe: economic activity “has accelerated.” Moscovici is optimistic, but concerns remains over salaries and labour

The document of the EU Commission, presented in Brussels today, assesses the progress made in 2017, indicating possible scenarios for the next two-year period. Investment and consumption are on track, public spending is more or less under control. However, growth is uneven in EU Countries: Italy’s debt anomaly, high-rate unemployment in Greece. China drives global GDP, but there are unknown factors such as Brexit, Catalonia and US protectionism

Bruxelles, 9 novembre: il commissario Pierre Moscovici illustra le Previsioni economiche d'autunno (foto SIR/CE)

After five years of moderate recovery, “economic growth in the EU has now accelerated”. Pierre Moscovici, Commissioner for Economic and Financial Affairs, presented the Autumn Economic Forecasts. He smiles and is relaxed. The French Commissioner, in office for the past 18 trimesters, as he pointed out, brought good news in the press room of the Berlaymont building, once again meeting the expectations. GDP growth is around 2% in the EU, with forecasts of moderate growth in 2017, estimated to ease somewhat in 2018 and in 2019. The Forecasts of the Commission cover the three-month horizon, although, Moscovici underlined, the “overall situation is unchanged.” Thus there is need for caution, the general picture could change in the next 24 months. Then Moscovici voiced the traditional appeal to Member Countries: “Everyone must do their share. We need to support growth with investments and reforms.” It is also possible to count on fiscal leverage. Finally, he stressed the two major concerns that emerge in the 190-page “European Economic Forecast – Autumn 2017”: first of all, unemployment is slowing down but not enough, registering different paces in EU Countries; second, wage growth is insufficient.

Numbers and assessments. Figures first: the Commission expects growth to continue in the euro zone at a pre-crisis pace. GDP in Euroland is set at 2.2% this year, at 2.1% in 2018 and at 1.9% in 2019. It’s a descending curve, but probably all political leaders would be more than happy with these figures in the light of the 2008 crisis. Growth accelerates in the EU as whole: 2.3% in 2017, 2.1 in 2018 and 2.0 in 2018. Forecasts don’t take the UK into account: the economy makes no concessions, and owing to Brexit, it’s already viewed as a “Third Country.” Moscovici presents figures and charts on annual deficits (relatively under control), national debts (decreased, but Greek, Italian and Portuguese abnormalities remain), inflation (fixed prices). As for the labour market, he writes in the forecast document: “Unemployment in the euro area is expected to average 9.1% this year, its lowest level since 2009, as the total number of people employed climbs to a record high.” Over the next two years, unemployment is set to decrease further to 8.5% in 2018 and 7.9% in 2019. In the EU, the unemployment rate is projected at 7.8% this year, 7.3% in 2018 and 7.0% in 2019. “Job creation is expected to moderate, as temporary fiscal incentives fade in some countries and skill shortages emerge in others.” Also in this case there are virtuous Countries, with minimum unemployment rates (the highest figures are registered in the Czech Republic with 3%; followed by Germany, Austria, Malta, Poland, Hungary, Ireland, Baltic Countries, Sweden and Denmark) and other with diversely problematic realities (Greece 21.8%, Spain 17.4%; Italy 11.3%; Croatia 11.1%).

The social aspect. Moscovici doesn’t fail to reprimand Member Countries, especially those lagging behind or with insufficient growth. “A determined effort from Member States is needed”, he said,

“to ensure that this expansion will last and that its fruits are shared equitably.”

His words were reiterated by Valdis Dombrovskis, Vice-President for the Euro: “Economic growth and job creation are robust, investment is picking up and government deficit and debt are gradually decreasing. There are however significant differences across Member States, with some of them still experiencing considerable slack in the labour market.” He thus made a further appeal on the “social” front: “Our policies need to remain firmly focused on making growth sustainable and inclusive.” It is necessary “to ensure that the benefits of growth are spread widely across our societies.”

Across borders. Notwithstanding the figures, the evaluation of the EU Commission calls into question national governments’ responsibilities, the hanging questions on Brexit and Catalonia, the role of the Central Bank – that “has kept its monetary policy very accommodative” –, the role of enterprises and banks. Moreover, the ongoing recovery has yet to create enough jobs to make up for those lost in the darkest years of the recession. The positive performance of China, Russia and Brazil is taken into due account, while there are fears of a “protectionist involution” of the United States. Furthermore – as daily news testifies to –questions relating to the possibility of a Korean conflict, the instabilities in the Middle East and in many African countries, and to the stability of the euro on financial markets, deserve serious reflection. What is clear is that European economy is strictly interconnected, much more than EU policy is. The single market and the euro currency require supportive policy measures, reforms and rigour for the good of sound public accounts, productive investments,  wages that keep up with price levels, widespread welfare. The economy crosses national borders, and we are all responsible for ourselves and for our travel companions.

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