Recovery in the EU still far away, Commission says

Brussels – The European Union’s economy continues to be in bad shape, the European Commission announced yesterday. Greece, however, leads the EU in growth, at a pace almost nine times that of the eurozone average and more than 20 times that of the EU as a whole. The Commission figures, from 12 out of 15 members – data from Austria, Ireland and Luxembourg were not included – show that second-quarter growth in the eurozone’s domestic product over the previous quarter was zero, while in the EU as a whole, it was a minus 0.1 percent. The slight discrepancy was the result of a minus 0.5 percent growth figure for Denmark, by far the worst for the second quarter of 2003. Greece’s growth over the previous quarter decelerated, from 2.9 percent in the first quarter to 0.4 percent in the second. On an annual basis, however, Greece grew at a 4.4 percent pace, way ahead of the second country, Spain, whose economy grew at a mere 2.3 percent pace. Positive growth was also experienced by the United Kingdom (1.8 percent), Sweden (1.5 percent), Finland (0.8 percent), Belgium (0.8 percent) and Italy (0.3 percent). France’s growth was zero, while there was negative growth in Germany (0.2 percent), Denmark (0.5 percent), the Netherlands (0.9 percent) and Portugal (2.3 percent). Overall, the EU’s annual growth rate was 0.2 percent and the eurozone’s, 0.5 percent. According to Commission estimates, eurozone growth will not exceed 0.5 percent for the whole of 2003. Until last spring, it had forecast 1 percent growth for the year. Thus, recovery, once forecast to begin in the second half of 2002, will not take place before the year’s end, despite the improvement on the international markets and the euro’s slight decline, which favors exports. Even the meager figure of 0.5 percent depends on a faster recovery in the US and Japan and a continued depreciation of the euro. This is because private investment in Europe is not expected to recover soon from its current bleak state. Even private consumption is stagnating because of the uncertainty created as a result of the economic slowdown. Thus, the Commission says, the only way out is the implementation of structural reforms, especially in the labor market, by making it easier for employers to hire and fire people. The Commission also places hopes on the Italian presidency’s proposal to revive the construction of trans-European transport and energy networks. This kind of European «New Deal» of big infrastructure projects has stagnated for decades, because, so far, it has been considered superfluous in good times and unattainable in bad ones. The other factor that will make or break a European recovery is whether the US can sustain its own economic recovery. However, signs from the other side of the Atlantic remain mixed, with the inability to create jobs quickly the most worrying factor. However, if trans-European network projects get going, this, along with declining inflation and interest rates, could lead to a slow recovery in the second half of the year. No one knows or dares forecast, however, what will happen in 2004.

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