Rehn very reserved about growth in Eurozone

Olli Rehn, Vice-President of the European Commission in charge of Economic and Monetary Affairs and the Euro, participated in the 2013 Euro Summit. The Vice-President made a speech entitled “Consolidating the return to growth” on this occasion. (EC Audiovisual Services, 03/12/2013).

Yesterday, Olli Rehn, the Vice-President of the European Commission responsible for Economic and Monetary Affairs and the Euro delivered a speech in the European Parliament, entitled “The recovery of the European economy”. In doing that, he couldn’t resist the temptation to reveal the truth that the recovery of the European economy which timidly appeared in the second quarter of this year, is now faltering. To this effect he said, “Since the summer, we have been seeing an economic turnaround in Europe, albeit a tentative one at this stage”.

This is a clear indication that the Commissioner, having more and accurate information than anybody else, authentically estimates  that the weak 0.3% rise of GDP during the second quarter of 2013, fades away during the year. Rehn explained that, “In Europe overall, growth turned positive in the second quarter of this year and this was confirmed for the third quarter “. Translating this ‘oracle’ one could safely deduce that the simple confirmation of the GDP rise in the third quarter cannot exceed the 0.3% of the second quarter and can very well be less than that, remaining however in positive part of the chart.

Soothing the markets

Of course Rehn could not leave the markets wondering about the future. In view of that, he felt obliged to express optimism about Eurozone’s prospects. Policy makers must always be sanguine otherwise everybody will start betting short on everything. That’s why he added, “We expect the recovery to gather strength next year and further in 2015”.

According to the current wisdom, this gathering of strength next year will be something around 1%, most probably below it. As for 2015, while making long-term predictions under the current uncertainties, one can practically say whatever one wants. Then Rehn concluded “Grosso modo, both reports forecast a similar economic scenario of a gradual recovery, which should provide for common ground on policies”. The two reports mentioned by the Commissioner are the two Annual Growth Surveys, one published recently by the Commission and the other presented on that occasion in the Parliament, by the organisation of “Progressive Friends”.

Reserved on growth

The weakness of growth as predicted by Rehn was also confirmed  at the end of his speech. He said “The latest economic indicators confirm that our economic strategy is paving the way for a sustained recovery. As I said, they should be seen as an encouragement to stay the course of economic reform”. Right or wrong, the economic strategy followed by the European Commission, a policy line trailed broadly by the speaker himself, had to be justified.

Despite the obligation, though, to justify the policies followed so far and planned to continue along the same lines, Rehn was again very restricted about the growth prospects. By saying that “indicators…confirm…the strategy paves the way for sustained recovery”, he very cleverly avoided the word ‘growth’. All in all there is no doubt that Rehn appeared very reserved in predicting growth. A one or two decimal points of a percentage unit increase in GDP would be a parody of growth…and a tragedy of prediction.

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