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E.U. Predicts Anemic Growth and High Unemployment in 2014 E.U. Predicts Anemic Growth and High Unemployment in 2014
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BRUSSELS — A fragile recovery across the European Union is not expected to bear fruit until next year, while unemployment is likely to hit new highs in countries like Greece and Spain, the head of economic policy for the bloc warned Tuesday.BRUSSELS — A fragile recovery across the European Union is not expected to bear fruit until next year, while unemployment is likely to hit new highs in countries like Greece and Spain, the head of economic policy for the bloc warned Tuesday.
Olli Rehn, the Union’s commissioner for economics and monetary affairs, said growth this year among the 17 euro-area countries was expected to slip 0.4 percent and to flatline in the 28 countries of the European Union, partly because of slowing demand from Asia and other emerging markets, before turning positive in 2014. Olli Rehn, the Union’s commissioner for economics and monetary affairs, said economic output this year among the 17 euro-area countries was expected to fall 0.4 percent and to flatline in the 28 countries of the European Union, partly because of slowing demand from Asia and other emerging markets, before turning positive in 2014.
“There are increasing signs that the European economy has reached a turning point,” Mr. Rehn said in a statement ahead of a news conference later on Tuesday when he is expected to formally present the so-called Autumn economic forecasts. “But it is too early to declare victory,” said Mr. Rehn, adding that a key issue is that “unemployment remains at unacceptably high levels.” “There are increasing signs that the European economy has reached a turning point,” Mr. Rehn said in a statement ahead of a news conference later on Tuesday when he was expected to formally present the so-called autumn economic forecasts. “But it is too early to declare victory,” Mr. Rehn said, adding that a key issue was that “unemployment remains at unacceptably high levels.”
Mr. Rehn said economic growth in 2014 should hit 1.1 percent in the euro area and 1.4 percent across the Union and continue to strengthen in 2015, when growth was expected to be 1.7 percent in the euro area and 1.9 percent in the Union.Mr. Rehn said economic growth in 2014 should hit 1.1 percent in the euro area and 1.4 percent across the Union and continue to strengthen in 2015, when growth was expected to be 1.7 percent in the euro area and 1.9 percent in the Union.
But Mr. Rehn also warned that employment was unlikely to recover as fast, something that could mean years of further hardship for the millions of Europeans who remain out of work or are looking for their first job. But he also warned that employment was unlikely to recover as fast, something that could mean years of further hardship for the millions of Europeans who remain out of work or are looking for their first job.
According to the forecasts, unemployment in the euro area will remain at 12.2 percent this year and through 2014, compared with a rate of 11.4 percent in 2012. Across the Union, unemployment was expected to be 11.1 percent in 2013 and before slightly easing to 11 percent in 2014. According to the forecasts, unemployment in the euro area will rise to 12.2 percent this year and remain at that level through 2014, compared with a rate of 11.4 percent in 2012. Across the Union, unemployment was expected to be 11.1 percent in 2013 before easing slightly to 11 percent in 2014.
In Greece, unemployment was expected to hit 27 percent this year compared with 24.3 percent in 2012. In Spain, the figures showed unemployment rising to 26.6 percent this year from 25 percent last year. The forecasts showed unemployment remaining at around a quarter of the workforce in both countries in 2015. In Greece, unemployment was expected to hit 27 percent this year, compared with 24.3 percent in 2012. In Spain, the figures showed unemployment rising to 26.6 percent this year from 25 percent last year. The forecasts showed unemployment remaining at around a quarter of the workforce in both countries in 2015.
The unemployment forecast for France is also likely to prompt concerns because it showed a steady rise over the next three years to 11.3 percent by 2015, from a level of 10.2 percent last year. In Italy, unemployment was expected to reach 12.2 percent this year, then rise again to 12.4 percent in 2014 and ease only slightly, to 12.1 percent, in 2015.The unemployment forecast for France is also likely to prompt concerns because it showed a steady rise over the next three years to 11.3 percent by 2015, from a level of 10.2 percent last year. In Italy, unemployment was expected to reach 12.2 percent this year, then rise again to 12.4 percent in 2014 and ease only slightly, to 12.1 percent, in 2015.
Mr. Rehn offers his forecasts three times a year, and to some extent they have become an exercise in justifying the kind of austerity medicine he has prescribed since the accumulation of enormous debt in countries like Greece, Portugal and Ireland that threatened the existence of the euro. The debt load has crippled other economies in the bloc and contributed to problems like chronic joblessness.Mr. Rehn offers his forecasts three times a year, and to some extent they have become an exercise in justifying the kind of austerity medicine he has prescribed since the accumulation of enormous debt in countries like Greece, Portugal and Ireland that threatened the existence of the euro. The debt load has crippled other economies in the bloc and contributed to problems like chronic joblessness.
On Tuesday, Mr. Rehn said that years of painful reforms and budgetary rigor made it more likely that domestic demand could gradually become the main engine for growth in Europe.On Tuesday, Mr. Rehn said that years of painful reforms and budgetary rigor made it more likely that domestic demand could gradually become the main engine for growth in Europe.
“The fiscal consolidation and structural reforms undertaken in Europe have created the basis for recovery” and “we must continue working to modernize the European economy,” he said.“The fiscal consolidation and structural reforms undertaken in Europe have created the basis for recovery” and “we must continue working to modernize the European economy,” he said.
Yet the economies of Germany and France, the largest in the euro area, were expected to post, at best, anemic growth of 0.5 percent and 0.2 percent respectively this year, while the economies of Italy and Spain, the third and fourth largest in the euro area, were expected to shrink by 1.8 percent and 1.3 percent respectively.Yet the economies of Germany and France, the largest in the euro area, were expected to post, at best, anemic growth of 0.5 percent and 0.2 percent respectively this year, while the economies of Italy and Spain, the third and fourth largest in the euro area, were expected to shrink by 1.8 percent and 1.3 percent respectively.
Two of the largest economies outside the euro zone, Britain and Sweden, were expected to post more robust growth of 1.3 percent and 1.1 percent this year.
Mr. Rehn has also recently gained powers to monitor national budgets and assess the performance of individual European economies. He was expected to use the forecasts on Tuesday to give clues about whether countries like France and Italy will need to make more efforts at reform and fiscal tightening, and whether Germany should do more to ease a trade surplus that international economic officials and the United States have criticized as too high.
Mr. Rehn is expected to give his final verdicts in mid-November.
The forecasts could increase the chances that the European Central Bank will take action to stimulate the economy when it meets on Thursday. Last week, official figures showed inflation falling to an annual rate of just 0.7 percent, well below the E.C.B.'s official target of about 2 percent. Mr. Rehn’s forecasts could bolster those members of the E.C.B.'s governing council who believe that action is needed to prevent the euro zone from becoming stuck in the same kind of economic stagnation that has long afflicted Japan.
A growing number of economists are forecasting E.C.B. action on Thursday, either in the form of a cut in official interest rates or stepped-up lending to euro zone banks, or both. Other E.C.B. watchers expect the central bank to hold off until December, after its in-house economists have updated their own forecasts.
With the E.C.B.'s benchmark interest rate already at a record low of 0.5 percent, “another cut now would leave precious little room to maneuver,” Carl Weinberg, chief economist at High Frequency Economics in Valhalla, N.Y., said in a note to clients on Tuesday.
European corporations remain cautious about the prospects for recovery in Europe. “If we have growth in Europe it will be at a very low level,” Norbert Reithofer, chief executive of the German automaker BMW, said during a conference call with reporters Tuesday. He said he expected growth to pick up during the second half of next year.