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European Union Raises Its Forecast for Growth European Union Raises Its Forecast for Growth
(about 2 hours later)
BRUSSELS — European Union officials on Thursday nudged up growth forecasts across the 28-nation bloc amid optimism that falling oil prices, a weaker euro and intervention by the European Central Bank were brightening the outlook for a region wrestling with economic stagnation.BRUSSELS — European Union officials on Thursday nudged up growth forecasts across the 28-nation bloc amid optimism that falling oil prices, a weaker euro and intervention by the European Central Bank were brightening the outlook for a region wrestling with economic stagnation.
Growth is expected to be 1.7 percent in the bloc this year, up from the 1.5 percent predicted in November, according to the European Commission, the union’s executive arm. The economy would expand by 2.1 percent in 2016, the commission said in its winter economic forecast. Growth is expected to be 1.7 percent in the bloc this year, up from the 1.5 percent predicted in November, according to the European Commission, the union’s executive arm. The economy is set to expand 2.1 percent in 2016, the commission said in its winter economic forecast.
It is the first time in eight years that all the economies of the bloc are expected to grow.It is the first time in eight years that all the economies of the bloc are expected to grow.
Growth in Germany, the region’s economic powerhouse, is expected to reach 1.5 percent this year compared with the earlier forecast of 1.1 percent. Other major eurozone economies like France and Spain also received slightly upgraded growth forecasts.Growth in Germany, the region’s economic powerhouse, is expected to reach 1.5 percent this year compared with the earlier forecast of 1.1 percent. Other major eurozone economies like France and Spain also received slightly upgraded growth forecasts.
But in Greece — where a lingering debt crisis threatens the rest of the bloc’s stability — the commission lowered projected growth to 2.5 percent this year compared with a more optimistic forecast of 2.9 percent in November. For Italy, which is battling to lower its huge debt, the projected growth rate for 2015 remains a meager 0.6 percent. But in Greece — where a lingering debt crisis threatens the rest of the bloc’s stability — the commission lowered projected growth to 2.5 percent this year compared with a more optimistic forecast of 2.9 percent in November.
That relatively robust level of growth is dependent on the implementation of overhauls Greece had agreed to make in exchange for bailout funding before the election victory of the anti-austerity party Syriza late last month. But Alexis Tsipras, the new Greek prime minister from Syriza, came to power promising to renegotiate or even scrap that package. This week, Mr. Tsipras and his finance minister, Yanis Varoufakis, were struggling to find common ground with European leaders and policy makers over the terms of the bailout.
For Italy, which is battling to lower its huge debt, the projected growth rate for 2015 remains a meager 0.6 percent.
In Britain, where the relatively strong economy has made the country one of the bloc’s star performers, growth this year is expected to be 2.6 percent, down slightly from the earlier forecast of 2.7 percent.In Britain, where the relatively strong economy has made the country one of the bloc’s star performers, growth this year is expected to be 2.6 percent, down slightly from the earlier forecast of 2.7 percent.
The levels of economic growth in Europe are still not enough to make a strong dent in unemployment. Although the jobless rate across the European Union should dip just below 10 percent this year, in the euro area, the rate will still be nudging 11 percent in 2016. The levels of economic growth in Europe are still not enough to make a strong dent in unemployment. Although the jobless rate across the European Union should dip just below 10 percent this year, the rate in the euro area will still be nudging 11 percent in 2016 — well above precrisis levels.
“Europe’s economic outlook is a little brighter today than when we presented our last forecasts,” said Pierre Moscovici, the European commissioner for economic and financial affairs. “The fall in oil prices and the cheaper euro are providing a welcome shot in the arm for the E.U. economy,” Mr. Moscovici said.“Europe’s economic outlook is a little brighter today than when we presented our last forecasts,” said Pierre Moscovici, the European commissioner for economic and financial affairs. “The fall in oil prices and the cheaper euro are providing a welcome shot in the arm for the E.U. economy,” Mr. Moscovici said.
He added that a European investment plan and the central bank’s intervention “help create a more supportive backdrop.”He added that a European investment plan and the central bank’s intervention “help create a more supportive backdrop.”
Mr. Moscovici was referring to the long-awaited decision by the European Central Bank to pump money into the economy, a move aimed at raising inflation toward the central bank’s target of just below 2 percent. Inflation that is too low — or worse, outright deflation — undercuts corporate profits, forces down wages and leads to higher unemployment.Mr. Moscovici was referring to the long-awaited decision by the European Central Bank to pump money into the economy, a move aimed at raising inflation toward the central bank’s target of just below 2 percent. Inflation that is too low — or worse, outright deflation — undercuts corporate profits, forces down wages and leads to higher unemployment.
— Inflation temporarily turned negative in December in most member states because of falling energy prices and is expected to remain subdued this year. But across the European Union the inflation rate should rise to 1.4 percent in 2016.
In the euro area, inflation is forecast to be minus 0.1 percent this year before climbing to 1.3 percent in 2016.
In a report accompanying the forecasts, Marco Buti, the director general for economic and financial affairs, warned there were still serious geopolitical risks — including the impact of Western sanctions on Russia for its interference in Ukraine, and countersanctions imposed by Russia — which could buffet the European economy.
“The recent sharp fall in oil prices should provide a welcome lift” during the short run, wrote Mr. Buti. “But this blessing would turn into a curse if it diverted policy makers from the formidable challenges that still lie ahead,” he wrote.