Rigour, revival and risks

The European economy grew in 2006 and, save for some deceleration, fairly strong performances are forecast for the next two years. Unemployment is tending to decrease, while inflation remains virtually stable. At the same time the public finances of the member countries have improved. The autumn economic forecasts, announced by the Commission on 6 November, paint a positive picture of the EU production system and labour market. But EU experts insist on the need for greater rigour in state budgets, and higher investments in innovation and competitiveness, without losing sight of the “external threats” that could bring disagreeable surprises, in particular the political instability of too many regions in the world. OPTIMISM IN BRUSSELS. “After years of disappointing results, the economy of the European Union in 2006 should register the best results since the start of the decade”, declared JOAQUÍN ALMUNIA , Commissioner for Economic and Financial Affairs. Almunia could not disguise some satisfaction in presenting in Brussels the autumn forecasts, a by now traditional event in the economic analysis of the Executive. The document contains short and medium term projections that give grounds for hope. The data presented show, according to the Spanish Commissioner, “the benefits of the economic reforms and the recovery of the public accounts in a global context of strong economic growth and ought to encourage the member states to progress further along this road”, which is “the only one that leads to a growth of employment”. The experts of the Commission predict that “the growth rate in 2006 should reach 2.8% in the 25-member EU and 2.6% in the eurozone” (12 states). Last year these figures were lower by one percentage point. Sharp national differences of course are being registered: for example, in 2006 the gross domestic product of Portugal is estimated at 1.2%, in contrast to 10.9% in Estonia and 11% in Latvia. SOME UNCERTAINTIES REMAIN. “The revival – says the report – is mainly due to a robust growth of internal demand, in particular that of investments, and to a sustained level of world growth”. The trend, however, is likely to “decelerate slightly” in the next two years. Despite what had been feared in recent months, the price of petroleum has not so far created insurmountable problems for Western production systems, although the energy question represents, according to all the experts, an ever-present danger for the EU. The unknown factors specified in the report, that could impact on the EU, include the threats to geopolitical stability, the resilience of the Asian economies and the future developments of the US and German economies. SHARP NATIONAL DIFFERENCES. The Commission’s estimates suggest a favourable trend in the labour market. “In the period 2006-2008 the EU as a whole should create 7 million new jobs”, 5 million of which in the eurozone. “That will help reduce the unemployment rate, which ought to decline from the average 9% of the workforce registered in 2004 to 7.3%” in 2008. In this case too the national disparities are considerable: the unemployed don’t exceed 4% or 5% in Austria, Holland and Luxembourg, rise to around 9% in Germany and France, but soar to 14% in Poland and Slovakia. Commenting on the labour data, the Commissioner for Employment and Social Affairs, VLADIMÍR ŠPIDLA , points out: “In spite of the growth in the employment of women and more elderly workers, progress towards the objective of a global employment rate of 70% is not fast enough” (today the figure is around 65%). The Czech Commissioner adds: “It’s clear that to achieve this objective”, a target of the Lisbon Strategy, “greater efforts need to be made in most member states. TIME OF “FLEXICURITY” . Špidla too has presented his data for the current year. In recent days he published the Commission’s 2006 Report on employment. It declares: “Seven Europeans out of ten agree in considering that labour contracts ought to become more flexible to encourage the creation of new jobs”. “Citizens are sending out a strong signal – explains the Commissioner for employment – about their willingness to adapt to the necessary changes in the European labour market”. At the same time, 84% of Europeans declare they are confident they can maintain their jobs in the next six months”, whereas “over half of those interviewed are still relatively hopeful about being able to find a new job in the event of redundancies”. The level of confidence in the labour market varies, however, from country to country: according to the Commission’s report, “Denmark is in first place: the country where the concept of ‘flexicurity’ was born: a concept often adopted as a model of how to combine flexibility with security of employment”.