Nearly nine years after the outburst of the financial crisis, the European economy’s recovery remains ‘elusive’ and unable to significantly reduce unemployment or resorb growing inequalities, according to the independent Annual Growth Survey (iAGS)* published today.
In their report, the experts predict that the economic growth in the EU will slow down in 2017 and 2018 with GDP reaching 1.6% and 1.5% respectively against 1.6% in 2016.
To improve Europe's economic prospects, the experts recommend a more expansive fiscal policy based in particular on a golden rule for public investment and a modified expenditure rule. They argue that the aggregate fiscal stance for the euro area would be neutral in 2017 if economic policy is conducted only on the basis of the rules of the Stability and Growth Pact. To strengthen growth, the EU and member states need to step up public investments.
The report also highlights that ‘a growth-oriented economic policy’ is necessary but not sufficient to obtain social progress and individual well-being. Policy makers need to move beyond the predominant, narrow focus on GDP growth and aim instead at a broader set of economic, social and environmental targets.
S&D Group vice-president responsible for economic and monetary affairs, Maria João Rodrigues, said:
“The 2017 iAGS confirms that stronger public investment can play a decisive role in increasing employment and improving the well-being of our citizens.
“We welcome the efforts which the European Commission has shown last week to adapt the economic policy to Europe's real economic and social needs. The Commission has actually followed what our iAGS experts and S&D parliamentarians have been arguing for a long time: the euro area is one big economy and it needs to define a common budgetary position that supports growth and ensures healthy public finances.
“It will be much easier for Europe to reduce previous public and private debts if we achieve higher growth. But for this we need to have higher investment and more action to tackle social inequalities.”
S&D Group spokesperson for economic and monetary affairs, Pervenche Berès added:
“The 2017 iAGS outcome raises lots of concerns. Some of our EU finance ministers among the most orthodox should read this document. Clearly, the European economy has not yet fully recovered from the financial crisis in 2008.
“As rightly pointed out by our experts, the accommodative monetary policy has now reached its limits.
“We need to activate all necessary measures to ensure that member states back the recovery and don't hamper it. This includes, in particular, upgrading the Juncker investment plan as soon as possible and to deal with non-performing loans.
“We want a new generation of structural reforms that stimulate human capital and that support investments as well as fight more effectively against inequalities.
“We need a budgetary capacity for the Eurozone and we need to get the tools for the Economic and Monetary Union to effectively serve the needs of the Eurozone.”
S&D Euro MP and European Parliament rapporteur for the European semester, Alfred Sant, added:
“The current economic situation in the European Union demonstrates the need for stronger efforts towards boosting public and private investment. More public investment generates greater business confidence that stimulates private investment. It is therefore time to update the Stability and Growth Pact rules to facilitate investment throughout the EU.”
*The independent Annual Growth Survey is carried out every year by renowned economic institutes. For its fifth edition, the 2017 iAGS was produced by experts from four institutes; AK Wien (Austria), ECLM (Denmark), IMK (Germany) and OFCE (France). It is presented by the Progressive Economy, an initiative of the S&D Group in the European Parliament, and designed to generate a truly public and informed debate on economic, social and environmental policy at national, European and global levels and actively promote progressive thinking at academic and political levels.