Economic slowdown

It’s no surprise: there is an economic slow-down, energy and food commodity prices increase and this is why it’s time to protect the families, “especially those with a low income”. Spring financial forecasts issued by the Commission on April 28 confirm GDP slow-down, which for the EU-27 is expected to settle at 2.8% in 2008 and at 1.8% in 2009, compared to last year’s 2.8%. In the euro-zone figures are around 1.5%. As customary, Brussels launched appeals to contain inflation and public budgets, while investments, research, innovation and training are viewed as secondary issues. The weight of “external factors”. Economic growth is undergoing a slow-down both in the European Union as a whole and in the 15 Countries which adopted the single currency. The Commissioner for Economic and Monetary Affairs, Joaquín Almunia , has a serious look while communicating data and describing charts. In the seat of the Executive, the “recession-risk” is advancing while concern is expressed over “imported inflationist pressures”, i.e., caused by external factors. The finger is pointed at financial turbulences triggered by the subprime loan crisis in the U.S. and by the huge increase in oil price and other sources. “Until now our economies resisted external shocks and we expect job opportunities to develop, however slowly – Almunia admitted-. We should preserve sound macro-economic policies and carefully avoid entering an inflationist circle which would mainly affect low-income families”. Uncertainty prevails. That which the Spanish Commissioner prudently defined a “moderate growth”, is due to “the permanence of the crisis in financial markets, to the marked slow-down in US economy and to the surge in basic commodity prices.”. The Commission’s experts declared that “the economy still resists thanks to solid fundamentals which we expect will provide employment to 3 million people in the years 2008-2009”, less than half of the 7.5 million newly-employed in the years 2006-2007. This year, consumption prices are expected to rise ‘temporarily’ to 3.6% in the EU, while they had reached 2.4% in 2007. With a mean annual 2% development (half a point less than declared in the fall 2007 forecasts), Europe still preserves a ‘relative advantage’ compared to the U.S., whose economic growth is expected to be 0.9% in the year 2008. The Commission described a “basic scenario where uncertainty will be the prevailing factor until the end of this year”. The EU will not be unscathed. In this problematic context, the Commission indicates reasons for hope: “EU economy is still in relatively good conditions to resist world turbulences – is written in the spring forecasts – thanks to the improvement of its fundamentals which entails, for instance, the lack of macro-economic unbalance and sound public budgets”. In effect, both public sector deficit and the balance of current entries settled under 1% of the GDP in the year 2007 “although relevant differences between the different Member States remain”. There are however statements that should be viewed prudently: “Family and enterprise budgets have greatly improved in the past years and EU unemployment rates and in the euro-zone have reached the lowest level in the past 15 years”. Since, according to the report, “Community economy will not be unscathed”. Investment growth marks the pace, private consumption decreased and employment rates settled after two positive years. The East grows, but there are no jobs. In an economy where “risks of an overall deterioration prevail”, we cannot neglect the outstanding differences existing in the different Countries. The Netherlands register a provisional 2% for the year 2008 which reaches 3.4% in the case of Greece. While France, the United Kingdom and Germany rank between 1.6% and 1.8%. Italy is considered at risk ranking last in Europe, with only 0.5% The data on the growth of Eastern European Countries greatly differ. These, despite backward economies, are proceeding at a speedy pace: Bulgaria with 5.8%, the Czech Republic 4.7%; Lithuania and Romania fly over 6%, Slovakia reaches 7% and Poland 5.3. In Eastern Europe unemployment data is reason for concern. Encouraging data regarding GDP growth also in the three candidate countries Croatia, Macedonia and Turkey, all above 4%. These Countries are also marked by high unemployment, which in Macedonia is over 30% of the workforce.