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European Union Slashes Growth Outlook in Eurozone
Nov 19, 2014

The European Commission has delivered a bleak assessment of the economic outlook for the Eurozone. The economic and employment situation is not improving fast enough in the EU. In such a situation the EU sharply cut its growth forecasts for the eurozone, warning that France and Italy remain huge problems for the sluggish European economy that is becoming a worry worldwide. The threat of deflation and recession combined with stubbornly high unemployment across the Eurozone loomed large in the European Commission's autumn economic forecasts.

In a grim set of numbers, EU cut its 2014 growth prediction for the 18-country area to just 0.8 percent from the previous 1.2 percent, then predicted expansions of 1.1 percent in 2015 and 1.7 percent in 2016. EU called for urgent investment to boost jobs and growth, amid fears that just two years after its last debt crisis, the Eurozone could again destabilise the global economy.

With years of austerity failing to reanimate the Eurozone, new European Commission president Jean-Claude Juncker has promised to unveil a 300-billion-euro ($380-billion) investment plan for the Eurozone.

Also haunting Europe is the danger of deflation, and while the EU believes prices will not fall outright, inflation will remain very low and drag on growth. The EU said inflation in the Eurozone this year would sink to a very low 0.5 percent and rise only to 0.8 percent next year— both way off the European Central Bank target of just under two percent.

Unemployment in the eurozone, already sky high in several crisis-hit countries, will remain a huge problem in the next few years. The rate would slip to 10.2 percent in 2016, still above pre-crisis levels and with Spain and Greece both at 22 percent.

Germany emerges as a worry from the EU figures, with the economy, normally seen as the continent's growth engine, set to expand by a sluggish 1.3 percent in 2014 and just 1.1 percent next year. But France and Italy stand out as the biggest problems. Both are under huge pressure from the EU to cut back on overspending and push through reforms that they have promised but largely failed to implement.

France's economy is predicted to grow just by 0.3 percent this year—against an earlier forecast of 1.0 percent—and expand by 0.7 percent in 2015. EU said France was also on track for the biggest budget deficit in the eurozone, surging to 4.5 percent of total GDP in 2015 and 4.7 percent in 2016, putting Paris at risk of being sanctioned by the commission for exceeding the EU limit of 3.0 percent.

Italy meanwhile will stay in recession for a third consecutive year with a contraction 0.4 percent, followed by 0.6 percent growth next year, while staying burdened by debt. Britain and Ireland gave the most cause for optimism, with the non-euro British economy set to grow by 3.1 percent this year and 2.7 percent next year, and Ireland by a whopping 4.6 percent this year and 3.6 percent next year.


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