EU gets a bit more positive over eurozone economic growth

AP News
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Posted: Feb 05, 2015 6:49 AM
EU gets a bit more positive over eurozone economic growth

BRUSSELS (AP) — The European Union has grown a little bit more positive about the 19-country eurozone following the recent sharp declines in the price of oil and the euro.

In its winter forecast published Thursday, the EU's executive Commission is predicting that the eurozone will grow by 1.3 percent in 2015, up from the 1.1 percent estimate in November.

Despite the boon offered from low oil prices, which can help shore up consumer spending, and the export-boosting fall in the value of the euro, the Commission, which supervises the finances of EU member countries, warned that weak investment and high unemployment continue to undermine progress.

It also said uncertainty over the economic outlook has increased, as geopolitical tensions, financial market volatility and poor follow-up on structural reforms muddy the waters.

"There is still much hard work to do to deliver the jobs that remain elusive for millions of Europeans," the EU's top economy official, Pierre Moscovici, said.

Any prolonged period of very low inflation or deflation would also be detrimental, the EU said.

According to the EU forecast, inflation, which dipped into negative territory in December, is likely to remain subdued this year due to low commodity prices, but could pick up mid-year and rise further in 2016. The forecast is minus 0.1 percent in the eurozone in 2015 and 1.3 percent in 2016.

Employment, meanwhile, is expected to pick up toward the end of 2015 but the modest level of economic growth means that any improvement is likely to be small. It's forecasting 11.2 percent unemployment by year-end, modestly lower than the current 11.4 percent.

Germany, the EU's biggest economy, is expected to grow by 1.5 percent this year. Growth in France and Italy, both struggling with large deficits, is set to rise to 1.0 percent and 0.6 percent, respectively.

Moscovici said that Italy's challenge remains its high public debt and weak growth, and he urged Rome to push on with reforms.

He said the Commission is still waiting for more details about Italy's reform agenda, and "confirmation that it will stand by its budgetary commitments for 2015."

He was cautiously optimistic about developments in France, noting its "more honorable growth in 2015."

In the broader 28-nation EU, the forecast predicts that all member economies will grow for the first time in eight years, with 2015 set to see a 1.7 percent expansion.