EU Commission, “the crisis is mostly behind us.” Multi-speed economic Europe reconfirmed

Macroeconomic data remain positive, in certain Countries – Germany, The Netherlands, the Czech Republic – unemployment fell to a historical minimum, supported by consumer and business confidence. It’s not a fairytale but the conclusions of Spring 2018 Financial Forecasts, released by the EU Commission on May 3^rd. Indeed, pointed out Commissioner Pierre Moscovici, “the guard cannot be lowered, while it would be wise to exploit the expansive phase to proceed with structural reforms” to secure markets, businesses and jobs in view of downturns, which are always possible. While for those countries with less reassuring trends – Greece, Spain, Italy, Croatia, United Kingdom – it is necessary to move forward with measures capable of reviving investments, innovation, production, consumption.

“Reforms needed”. “Thanks to widespread efforts, the crisis is finally behind us”, Moscovici said, smiling, flaunting the institutional document. “Unemployment is around pre-crisis levels. Deficit is forecast to fall under 3% in all euro area Member States”, and figures are forecast to remain the same in 2019. “However, owing to increased exposure to external risk factors”, such as US protectionism, “this is not the time to rest on laurels.” It is necessary to focus on “policies and reforms to boost growth”, starting with education and qualification of youths, research and digital technology. Commissioner Moscovici, who is in charge of Economic and Financial Affairs, Taxation and Customs, presented charts and figures, and pointed out that the growth rates of the EU28 and the euro area (19 States adopting the single currency) exceed expectations, with growth of 2.3% and 2.0% respectively in both the EU and the euro area. However, analysing Country by Country, he said: “Germany is in line with the EU average (at 2.3% in 2018, 2.1 in 2019) supported by domestic demand, so is France (2.0%), registering increasing exports. Italy grows by only 1.5%” (1.2 in 2019), ranking last in the EU, on the same level as the United Kingdom, that is starting to suffer the consequences of the Brexit vote. “Growth remains strong in Spain, although it is expected to decelerate slightly.” Record-breaking GDP growth was registered in Ireland (+5.7%), Slovenia (+4.7) Romania (+4.5) followed by Poland, whose GDP is set to grow by 4.3%. Obviously these figures don’t provide the whole picture, especially with regard to standards of living, wages, social protection and social security … But they are very telling.

Public debt. “Private consumption remains strong, while exports and investment have increased”, according to the Forecasts. “Unemployment continues to fall and is now around pre-crisis levels”: yet there are several countries where employment rates of young people and women are lower, as happens in some Mediterranean countries. Without neglecting the fact that “the economy is more exposed to external risk factors, which have strengthened and become more negative.” Growth, described as “robust”, is facilitating a further reduction in government deficit and debt levels, but also in this case distinctions need to be made in a multispeed Europe. In fact, while euro area’s debt-to-GDP ratio is of approximately 80%, in Greece it amounts to 177%, in Italy 130, in Portugal 122, in Cyprus 105, in Belgium 101, in Spain 97, in France 96.

Risks and…caution. Valdis Dombrovskis Vice-President for the Euro and Social Dialogue, cautiously remarked: “The economic expansion in Europe is set to continue at a solid pace this year and next, supporting further job creation. However, we also see increased risks on the horizon. This is why we should use the current good times to make our economies more resilient. This means building fiscal buffers, reforming our economies to foster productivity and investment, and making our growth model more inclusive. It also means strengthening the foundations of our Economic and Monetary Union.”

Labour market. While large numbers seem to support the Commissioners’ analysis, those left without a job, who lost their income and social security during the financial and economic crisis, have every reason to be skeptic. “Unemployment continues to fall and is now around pre-crisis levels”, dating back to the year 2008, the Commission declared. In the EU, “unemployment is set to continue to decline, from 7.6% in 2017 to 7.1% in 2018 and 6.7% in 2019. Unemployment in the euro area is forecast to fall from 9.1% in 2017 to 8.4% in 2018 and 7.9% in 2019.” These figures are set against the general picture of Europe as a large common market, where labour mobility, especially when involving young people, should not be viewed as “brain drain”: “while in certain Member States unemployment is still high, in others, job vacancies are already getting harder to fill.”

Protectionism on the horizon. Which risks is the EU exposed to according to Brussels’ economic and financial experts? “Externally, the financial market volatility experienced in recent months – states the Institutional Paper – is likely to become a more permanent feature in the future, which will add to uncertainty. Pro-cyclical fiscal stimulus in the US is expected to boost short-term growth, but to raise the risk of overheating and the possibility that US interest rates rise faster than currently assumed.” Furthermore, an “escalation of trade protectionism presents an unambiguously negative risk to the global economic outlook.”