Still sailing through rough waters

"On an annual bases, GDP is set to contract by 0.3% in the EU and 0.4% in the euro area in 2012; GDP growth for 2013 is projected at 0.4% in the EU and 0.1% in the euro area. The economic autumn forecasts for 2012-2014, presented on November 7th by Olli Rehn, leave little room for positive signs, at least on the short term. The Commissioner of Economic and Monetary Affairs, however, foresees, at least in some countries, "recovery signs" already in the coming 12 months. He added: "Major policy decisions laid the foundations for strengthening confidence. Market stress has been reduced, but there is no room for complacency. Europe must continue to combine sound fiscal policies with structural reforms to create conditions for sustainable growth, in order to bring unemployment down from the current unacceptably high levels".Rebalancing process. In front of journalists in Brussels, the Finnish Commissioner spoke about EU economy as "still sailing in rough waters". "It is a difficult process of macroeconomic rebalancing, which will last for some time", he explained. Rehn also highlighted that some measures and decisive National and European reforms (such as the fiscal compact, six-pack, European Financial Stability Facility, the growth pact, projects of banking and economic union) are providing the first effects, even if "sound" fiscal polices are needed, actions in favour of real economy and employment, tight public budgets, cuts in state debt. For the coming year Rehn spoke of " a moderate economic growth and a strengthened growth in 2014". The Commissioner also gave an overview of the world economy, and Europe’s position. "Global Gross Domestic Product growth has lost steam, especially in Japan. There are signs of recovery in the US notwithstanding issues in fiscal policy". He also congratulated the newly re-elected President Obama hoping he will soon resume his work to re-launch the economy and keep the federal budget under control. "Emerging" economic systems such as China, Brazil and India show "moderate signs of growth in 2012-2013, with an improvement in the following year. Unemployment peak. Getting back to Europe, Rehn thinks that the reforms that are being adopted should lead to some type of re-launch, with a GDP growth in 2014 of 1.6% in the EU and 1.4% in the euro area. Definitely not a leap forward but better than negative numbers. Inflation should stay around or below 2%. In 2013 "unemployment is expected to peak at 11% in the EU and 12% in the euro area, with great imbalances among countries. And now the deficit: according to the forecasts " government deficit are expected to fall to 3.6% in the EU and 3.3% in the euro area in 2012". "General government debt in 2012 stands at 93% in the euro area and at 87% of GDP in the EU". For 2013, it is projected to rise to 95% of GDP in the euro area and 89% in the EU, but to stabilise thereafter". Rehn also pinpointed some mandatory measures for recovery: actions to eliminate growth constraints; control of domestic current accounts, foster public and private investments. He also mentioned some of the EU implement initiatives or the ones being considered. Member States. As usual, the Commission’s Forecasts provide many domestic data. For example, for the Commission Germany, France and the Netherlands are expected to gain momentum by the beginning of 2013. Commissioner Rehn explained that "in Italy and Spain domestic demand will recover slowly after mid-2013, as for Portugal". The United Kingdom will start a mild recovery in 2013 "with an increase in the following year". Poland is expected to have a slowdown horizon for the next twelve months. The Baltic Republics are the ones, according to the Commissioner who have shown a more significant development, after having overcome the effects of the 2008 crisis. "These countries – Rehn said – registered a meaningful contraction of unemployment. For Greece, finally, "recovery is projected from 2014". As long as Athens continues to have confidence and implement its reforms and those inevitably painful "cuts", necessary to continue to receive support from Europe and put Greece economy back on its feet.