EU economy lagging behind this year

Rehn urges member states to prioritise

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The economy of the European union threatens to fall behind those of other economies as the world recovers from its economic crisis.
      Growth in Asia and the United States resumed already late last year, while Europe continues to move more slowly.
     
The slow pace is expected to continue in 2010, according to a forecast put out by the European Commission on Thursday. The forecast was announced by The new European Commissioner for Economic and Monetary Affairs Olli Rehn.
      The Commission predicts 0.7 per cent growth for this year. The figure is the same for both the entire 27-member EU and the 16 countries that use the common European currency, the euro.
      The forecast is similar to what the Commission predicted in November.
     
Rehn said in Brussels on Thursday that while growth has started, it remains fragile. He expects that it will strengthen later this year.
      The EU member states currently face a difficult choice. There is a need to stabilise state finances to reduce their debt burden, while at the same time, investments are needed in order to guarantee jobs for the citizenry and better competitiveness for the EU.
      Rehn says that the countries need to prioritise, “to enhance the quality of public finances so we have room for investment.”
     
Rehn pointed out that there are great differences in the economic situations of the different member states.
      Germany will be able to stimulate its economy this year more than last year. The Germans have room to manoeuver because it has managed to deal with its economic situation.
      Then there are countries are so indebted that cutting the debt takes precedence over everything else, because otherwise debt servicing costs will go out of control.
      One of these countries is Greece.
     
Rehn’s forces are now preparing a proposal under which the budgets of the EU member states are to be taken under closer scrutiny.
      Rehn wants the euro zone to review the medium-term budgets of the member states. “In this way we could avoid confronting more situations like the one in Greece”, Rehn said to Helsingin Sanomat.
     
A tighter-knit economic and budget policy of the EU would require the approval of the member states and the European Parliament.
      On Wednesday, Joseph Daul, the leader of the largest political group in the European Parliament, the centre-right EPP, said that the member states should have their budgets passed within the euro zone before they are passed on to the national Parliaments.
     
The EU’s interim forecast covers the seven largest member states - Germany, France, the UK, Spain, Italy, the Netherlands and Poland, which together account for 80 per cent of the EU’s GDP.
      The economy is growing in all of the countries except for Spain. For the economic powerhouse Germany, the Commission predicts 1.2 per cent growth this year.
      Britain’s growth figures have been revised downwards.


Previously in HS International Edition:
  Rehn gets Economic & Monetary Affairs Commissioner post (27.11.2009)

Helsingin Sanomat