European Commission calls for slow growth through 2015

Feb. 25, 2014 at 9:22 AM   |   Comments

BRUSSELS, Feb. 25 (UPI) -- The European Commission Tuesday said the economy in the 18-member eurozone would grow modestly through 2015, but not fast enough to bring down high unemployment.

The commission said its economists called for "a moderate step-up in economic growth," which included inflation-adjusted gross domestic product growth of 1.2 percent in the eurozone in 2014, which is expected to accelerate to 1.8 percent in 2015. Economic growth in the larger 28-member European Union, concurrently, is expected to reach 1.5 percent in 2014 and 2 percent in 2015.

With two years of negative growth and unemployment at 12 percent in the eurozone -- the 18 countries that share the euro -- and 10.7 percent in the EU, the commission said improvements are expected across the region, although there are still "substantial differences" in debt levels between various states.

The region's headwinds include low inflation and high unemployment, the commission said. Unemployment is expected to remain high "as labor market developments typically lag those in gross domestic product by half a year or more," the commission said.

The commission forecast unemployment edging towards 10.4 percent in the EU and 11.7 percent in the eurozone by 2015, "with cross-country differences remaining very large."

Expect inflation at 1 percent in the eurozone and slightly higher in the EU in 2014 with a 0.25 percentage point increase in both regions in 2015, "when economic growth gains momentum."

Debt to gross domestic product ratios are expected to improve, reaching 90 percent in the EU and 96 percent in the eurozone. Budget deficits are likely to decline to 2.7 percent in the EU and 2.6 percent in the eurozone in 2014, the commission said.

"Risks are more balanced than they were in autumn," said the forecast report, which is released three times per year.

But risks remain, the commission said. The largest risk "is a renewed loss of confidence that could stem from a stalling of reforms at national or European level," the commission said.

The commission also warned of "sustained very low inflation," which is a sign of a stagnant economy.

The commission said there was "only a marginal probability of shocks large enough to de-anchor inflation expectations and initiate EU-wide deflation." Nevertheless, the concern is large enough to deserve a mention.

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