EU fans hopes of modest recovery
Source: Agencies |
May 12, 2012, Saturday
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Print Edition
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THE European Union yesterday said a recession brought on by a crippling debt crisis could give way to a modest recovery later this year - provided governments persevere on the tough austerity track.
It suggested that more growth-enhancing measures can be pursued alongside strict budgetary controls, but only as long as they do not detract from achieving deficit reduction targets.
In its half-yearly economic projections, the European Commission, the executive arm of the EU, said the economy of the 17 countries that use the euro will fall by 0.3 percent this year. The forecast reflects the huge impact on Europe that austerity measures, such as spending cuts and tax hikes, have had on the region. In November, the commission was predicting growth of 0.5 percent in 2012.
Over the past few weeks, there's been a rising tide of opinion across Europe that the austerity approach alone isn't working in getting the public finances back into shape fast enough.
Budgets cuts have pushed many euro countries into recession and forced up unemployment in countries like Spain to nearly one in four.
Shrinking economic output means lower tax revenue for the government and increasing unemployment bills, making it more difficult for countries to get borrowing levels down.
That's why French President-elect Francois Hollande made a more growth-oriented approach the platform for his victory over Nicolas Sarkozy in last Sunday's election and why a majority of Greeks voted against parties that were backing austerity.
Pushing back against these calls, the EU's monetary affairs chief Olli Rehn said that if countries continued with the budget cuts, growth would return next year, and that the current recession is likely to be "mild" and "short-lived."
He insisted governments with excessive debt and deficits continue with the belt tightening.
"We cannot pile debt over debt, and it is essential that we are continuing fiscal consolidation and staying the course," Rehn said at a presentation.
It suggested that more growth-enhancing measures can be pursued alongside strict budgetary controls, but only as long as they do not detract from achieving deficit reduction targets.
In its half-yearly economic projections, the European Commission, the executive arm of the EU, said the economy of the 17 countries that use the euro will fall by 0.3 percent this year. The forecast reflects the huge impact on Europe that austerity measures, such as spending cuts and tax hikes, have had on the region. In November, the commission was predicting growth of 0.5 percent in 2012.
Over the past few weeks, there's been a rising tide of opinion across Europe that the austerity approach alone isn't working in getting the public finances back into shape fast enough.
Budgets cuts have pushed many euro countries into recession and forced up unemployment in countries like Spain to nearly one in four.
Shrinking economic output means lower tax revenue for the government and increasing unemployment bills, making it more difficult for countries to get borrowing levels down.
That's why French President-elect Francois Hollande made a more growth-oriented approach the platform for his victory over Nicolas Sarkozy in last Sunday's election and why a majority of Greeks voted against parties that were backing austerity.
Pushing back against these calls, the EU's monetary affairs chief Olli Rehn said that if countries continued with the budget cuts, growth would return next year, and that the current recession is likely to be "mild" and "short-lived."
He insisted governments with excessive debt and deficits continue with the belt tightening.
"We cannot pile debt over debt, and it is essential that we are continuing fiscal consolidation and staying the course," Rehn said at a presentation.
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