Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Euro zone to rebound more strongly, borrowing curbs to stay on hold -EU

EconomyMay 12, 2021 09:53AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: A woman walks next to a poster reading "The best team. With distance." in front of a BMW factory as the spread of the coronavirus disease (COVID-19) continues in Munich, Germany, December 9, 2020. REUTERS/Andreas Gebert

By Jan Strupczewski

BRUSSELS (Reuters) -The euro zone economy will rebound from its COVID-19 slump more strongly than previously thought this year and next, the European Commission said, but EU borrowing limits should remain suspended in 2022 so as not to jeopardise that recovery.

The aggregate growth of the 19 countries sharing the euro currency is likely to be 4.3% this year and 4.4% in 2022, the European Union's executive arm said, revising upwards its forecast from February of 3.8% growth in both years.

"The EU and euro area economies are expected to rebound strongly as vaccination rates increase and restrictions are eased. This growth will be driven by private consumption, investment, and a rising demand for EU exports from a strengthening global economy," it said on Wednesday.

The forecast brings the Commission closer to the International Monetary Fund, which last month said it expected 4.4% growth in the euro zone this year.

The Commission said recovery rates would differ across the 19 countries sharing the euro, with Germany likely back at pre-crisis levels as soon as the end of this year, France in the first quarter of 2022 and Italy and Spain only at the end of 2022.

The need to return to pre-crisis levels has been an argument for suspending EU borrowing limits for governments in 2020 and 2021, and the Commission said in March that while its final decision would depend on the May forecasts, the EU should keep the limits suspended in 2022 to help economies rebound.

Economic Commissioner Paolo Gentiloni said the Commission would recommend later in May keeping the suspension in place.

"On the basis of this forecast... EU fiscal rules should stay suspended in 2022," he told a news conference.

Still, government pandemic borrowing has had an impact on the euro zone's finances: aggregate public debt is to rise to 102.4% of GDP this year from 100% in 2020 and 85.8% in 2019. It will edge lower only to 100.8% in 2022, the Commission forecast.

The aggregate euro zone budget deficit is to balloon to 8% of GDP this year before halving to 3.8% in 2022.

"Policy support withdrawal... if premature, could jeopardise the recovery," the Commission said in the forecast.

Inflation, which the ECB has struggled for years to bring closer to its target of below but close to 2%, is to accelerate to 1.7% in 2021 from 0.3% in 2020 and slow down to 1.3% in 2021.

The EU's recovery effort, financed through unprecedented joint borrowing and disbursed in grants and loans through the Recovery and Resilience Facility (RRF), is to boost public investment to 3.5% of GDP in 2022, the highest level in more than a decade, Gentiloni said.

"The total EU expenditure expected to be financed by RRF grants over the forecast horizon amounts to 140 billion euros, or just below 1% of 2019 GDP. The total economic impact generated by the RRF over 2021-2022 is expected to be approximately 1.2% of 2019 EU real GDP," Gentiloni said.

He said the EU also expected positive spillover effects of 0.3% of GDP in 2021 and 0.2% of GDP in 2022 from U.S. stimulus programmes.

Euro zone to rebound more strongly, borrowing curbs to stay on hold -EU
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email