THE EUROPEAN Commission says Europe’s economies face headwinds as they move out of the EU’s deepest recession, warning in a new forecast that the nascent recovery remains “fragile” and has yet to be tested.
Despite the financial emergency in Greece and rising concerns about the weak position of the Spanish and Portuguese economies, the EU executive left unchanged at 0.7 per cent its projection of likely growth this year in both the euro zone and the union at large.
Economics commissioner Olli Rehn said uncertainty over the forecast was rife, stating that recent turbulence in financial markets illustrated the high uncertainty that surrounded projections in the current scenario.
The commission expects the euro zone inflation rate to be 1.1 per cent this year, well beneath the European Central Bank’s target rate of just under 2 per cent.
The forecast comprises the commission’s assessment of the seven largest countries in the union: Germany, Spain, France, Italy, the Netherlands, Poland and Britain, which represent 80 per cent of the union’s overall economy.
As a result, it makes no comment on the performance of smaller countries such as Ireland. The commission’s next forecast for Ireland comes early in May, more than four months after Minister for Finance Brian Lenihan introduced his swingeing budget.
The commission said exports were sustaining growth in Germany, motor of the European economy, and said Britain was emerging “with little momentum” from recession. Poland was front-runner in the recovery phase.
Presenting his first official projections since he assumed the economics portfolio a fortnight ago, Mr Rehn said the consolidation of public finances was crucial to Europe’s recovery prospects.
The fact that European industrial production lagged far behind Asian and other economies was a concern, adding that the “crux” of Europe’s dilemma was the requirement to boost investment in innovation and education while seeking to stabilise public finances.
Improved sentiment indicators pointed to an expansion of activity in the future, it said, but “hard data” – in the industrial production and retails particularly – were less encouraging.
