BRUSSELS, Nov 7 — The EU slashed its already low growth forecast for the eurozone today, intensifying pressure on Germany and other rich countries to spend more to stimulate the economy in Europe.
The European Commission said the 19-country single currency bloc would expand by just 1.1 per cent this year, down from the 1.2 per cent forecast in July.
The commission, which closely monitors public spending by the EU’s 28-member states, said the eurozone economy would then rebound weakly to 1.2 per cent in 2020 and 2021.
“The European economy has held up well despite a less favourable external environment,” said European Commission Vice-President Valdis Dombrovskis.
“However, we may face difficulties in the future: a period of great uncertainty related to trade conflicts, heightened geopolitical tensions, persistent weakness in the manufacturing sector and Brexit,” he added.
The EU warned that the sluggish growth rate would directly impact strained budgets, with countries burdened by huge public date rates — such as Italy, Greece and France — likely to see those levels increase further.
The European Central Bank, backed by the IMF and leading economists, has led a campaign to persuade Germany, Netherlands and others to boost spending, but so far those countries have refused the call.
Export champion Germany is under the most pressure to loosen its purse strings as its economy flirts with recession, with its crucial manufacturing sector especially knocked down by the US-China trade war.
The EU said that Germany would grow by just 0.4 per cent in 2019 and reach 1.0 per cent in 2020 and 2021 — a low growth patch that will drag down other parts of Europe.
Despite the poor performance, Germany is slated to keep running public budget surpluses over the next three years, building up a cash pile that the commission believes could be better spent boosting the economy.
Italy will have the slowest growth across Europe this year, barely averting recession with 0.1 per cent expansion.
The EU said this would swell Italy’s public debt pile to a staggering 137.4 per cent of annual output by 2021, the biggest debt level in Europe except for Greece after three bailouts.
Spain’s growth this year would hit 1.9 per cent, the fastest pace for the EU’s big economies, but this was significantly lower than the 2.3 per cent rate forecast just four months ago. — AFP