Earlier last month, the Commission provided Member States with a number of benchmarks with the aim of bringing them all in line and addressing nations with blatantly risky spending policies. All this, through the first annual list of growth targets, should prove to be fruitful in helping Member States get their budgets in sync.
President Barroso referred to it as “a new phase in European Integration”. All of the Union’s 27 members have agreed to solid objectives in eight areas, which include employment, climate and energy, education and poverty. These go hand in hand with the ‘Europe 2020 strategy’ and are designed to support Europe’s recovery from the worst recession in decades.
This having been said, the Commission is also aware that for certain countries such as Spain, Ireland and Portugal, the road to achieving these targets will be harder, even though they have drastically reduced spending.
Nevertheless, the European Commission has declared that the economic recovery is making headway, raising its eurozone forecast. The Commission publishes economic forecasts four times a year, with the next one due at the end of May. This forecast was positive, although we are quickly reminded that inflation will be higher due to rising oil prices.
On one side we have solid global growth – the increased activity in Germany is spilling over to other Member States. On the other side recurring tensions in financial markets cannot be ruled out, with risks to inflation directly related to the Middle East another important factor. The picture does portray some uncertainty, but risks to EU growth look balanced.
The GDP of the eurozone countries is expected to increase by 1.6% in 2011, a little over what was predicted at the end of last year. The largest machine in the eurozone, considered to be the German economy, is expected to expand by 2.4%, whilst Britain’s is expected to expand by 2%, and France 1.7%, according to the most recent data released. On the other hand, Mediterranean countries that have debt problems will see smaller growth, with Italy at just over 1%, and Spain just below it. The assurance made by EU Economic and Monetary Affairs Commissioner Olli Rehn was that “rebalancing of growth towards domestic demand is expected for 2011, resulting in more sustainable growth”. He added that an agreement on an ambitious agenda of fiscal consolidation is required to ensure a stronger recovery. However, we are also reminded of the situation in the Middle East, that will have a definitive impact. Oil prices have already soared over the $100 a barrel, when the Commission had estimated $80 a barrel; although Rehn believes that the effect on economic growth will be rather limited.
On this note, the EU executive has readjusted its inflation estimates for the eurozone up from 0.8% to 2.2%. The Commission believes that inflation will peak in the first quarter of 2011 before gradually falling back towards 2.0% by the end of the year. It is believed that exports should keep supporting the recovery that now seems more realistic than ever. More sustainable growth is expected for this year, with a shift of this growth towards domestic demands, with the recovery remaining evenly spread over Member States.
We are looking at a fairly dynamic situation – the eurozone is gaining significant ground, with some Member States having extremely positive indications of growth, in response to the crisis that had a lasting effect on all our economies. And all this is happening within a dimension of severe uncertainty in North Africa, particularly in Libya, with which we have serious ties. However, even on this note, Europe has reacted with one strong voice, and we are sure to be prepared for the effects this may have on our economies that are recovering at a steady pace from the financial turmoil.
David Casa is a Nationalist MEP