Closing ranks

Irrefutable signals that indicate a recession that is now behind us alongside daily experiences that tell us quite the opposite, attesting to growing unemployment and a great deal of uncertainty in factories and in markets: discordant opinions on the European economy, in response to which EU member states promise once again to close ranks to facilitate the recovery.“The worst is over”. The European Council at the end of October, after reviewing the economic and employment situation in the EU, underlined in its final document the need “to prepare a coordinated strategy for exiting from the broad-based stimulus policies when recovery is secured”. After having drawn heavily from state budgets to help boost industrial and trade systems, the 27 consider that the worst has passed and are already looking to the post-crisis. But the figures furnished by the European Commission on 3 November don’t seem to induce much optimism, despite the reassurances furnished by Joaquin Almunia, Commissioner for Monetary Affairs: “The economy of the Union is emerging from the crisis, especially thanks to the ambitious measures adopted by governments, central banks and EU, which not only have averted the collapse of the system but have also kick-started the recovery”. GDP, consumption, jobs. Illustrating the autumn economic forecasts, a document that reviews the last few months and looks ahead to 2011, Almunia explained that Europe “will exit from the crisis in the second half of this year, although GDP is likely to suffer an overall fall of approximately 4% for 2009”. In Brussels experts are predicting “a gradual recovery”, given that “gross domestic product forecasts are growing”: three quarters of one percent in 2010 which is set to rise to +1.5% in the following year. The improvement of financial markets, and the injections of public money in economic systems, are inducing a more optimistic situation. Even Almunia however could not disguise the problems linked to a slump in consumption and investments and especially the growing rate of unemployment, already at its highest recorded levels and set to continue to grow to break through the 10% barrier in the EU27. “Public deficits too are likely to increase, reaching 7.5% of GDP in 2010, before decreasing slightly in 2011 when the economy will recover and the temporary measures will be gradually phased out”.“Highly uncertain” prospects. The document presented in Brussels reports a series of data and tables at the EU and national level: it maintains that after having gone through “the deepest, longest and most widespread crisis in its history, the EU economy “has come to a turning point”. The last few months have registered a “clear improvement” both at the industrial and financial levels, “due in large part to the adoption of unprecedented monetary and budgetary measures”. Almunia said that “forecasts on GDP and on trade at the global level, especially in the emerging economies”, are improving”. He then specified: “To maintain the impetus and ensure the sustainability of the recovery, it is essential to proceed to the full implementation of all the measures announced”. If the crisis could be considered “almost overcome”, the future still remains “highly uncertain and subject to risks that we cannot ignore”. That’s why the Spanish Commissioner urged that there’s no room for complacency and that the international situation, the “climate of confidence” of businesses, the capacity of the banking system to finance companies and, once again, unemployment and the deterioration of public accounts, be kept firmly under control.Family budgets still at risk: “The improvement of short-term prospects in the EU and abroad derives in part from temporary factors: as their effect gradually vanishes in the course of 2010, it is probable that activity at the world level will suffer a slowdown”. Each page of the autumn Forecasts presents positive and negative aspects. Both the value of exports and internal demand remain indefinite, according to the Commission’s experts; at the same time “investments won’t start to pick up till 2011”. The document therefore underlines the point: “The expenditure of families in the coming period will be limited by the need to re-adjust domestic budgets and by the far from rosy forecasts for the labour market”. As far as jobs are concerned the analyses of the Commission remain negative. And Almunia does not disguise this. “Despite the fact that the labour market of the European Union has resisted the crisis better than predicted, a loss of jobs is expected in the next three months”. According to the Commission’s forecasts, this year employment will fall by almost 2.25%, and in 2010 will further decline by c.1.25%. The labour market will stabilize “towards the end of 2010 and in 2011, once the recovery has been consolidated”. Lastly, as far as public finances, “hard hit” by the crisis, are concerned: “It is estimated that this year the public deficit will triple in the EU and in 2010 will continue to rise until it has reached 7.5% of GDP”.