Has the EU economy truly revived from the financial crisis?

Press statement by Pierre Moscovici, Member of the EC
Date: 12/07/2017 Location: Brussels – EC/Berlaymont
© European Union , 2017. Source: EC – Audiovisual Service. Photo: Jennifer Jacquemart

Last week the European Commission published a press release regarding EU’s recovery from the financial crisis where it is mentioned that the EU, after 10 years since that start of the crisis, is back to growth because of the EU influential actions.

What is more, it was announced yesterday that Germany’s gross domestic product in the second quarter grew 0.6% over the previous quarter. The Federal Statistics Office specifically said that the GDP growth followed a revised of 0.7% growth in the first quarter, according to figures adjusted for seasonal and calendar variations.

However, there are more challenges for the EU economy as Brexit has not yet shown its impact and consequences to the real economy.

EU’s growth rebounds

The EC has been supporting that the EU is stronger compared to ten years ago when the financial crisis began and is showing great improvement. More specifically, Vice-President Valdis Dombrovskis, responsible for the Euro and Social Dialogue, said last Wednesday: “Thanks to the determined policy response to the crisis the EU economy is now firmly recovering and the Economic and Monetary Union is stronger than before. We need to build on this progress, completing the financial union, reforming our economies to foster convergence, inclusiveness and resilience, and maintaining sustainable public finances. In doing so, we should pursue a balanced approach where risk reduction and risk sharing go hand-in-hand and the unity of the single market is preserved.”

Furthermore, Commissioner Pierre Moscovici, responsible for Economic Affairs, Taxation and Customs, mentioned that the economic growth of the EU has been intense but we must continue with the completion of the Union. In detail, Commissioner Pierre Moscovici said: “Ten years after the global crisis began, the recovery of the European economy has firmed and broadened. We must use this positive momentum to complete the reform of our Economic and Monetary Union. Not all legacies from the past correct automatically. We have seen greater social and economic divergences develop in and among Member States. It is essential that our work going forward contributes to the real and sustained convergence of our economies.”

The EU is thus showing recovery signs as business and consumer confidence has increased and Eurozone’s unemployment rate has reduced to 9,1%; 2,9% lower compared to the levels during the financial crisis. The main fall has been occurred in Spain and Germany while Italy and France still suffer from higher unemployment rates.

Germany’s share

Germany confirms her title once more as the largest EU economy as the statistics office showed that the economy expanded by 0,6% in the second quarter. Growth was driven by domestic demand while consumers and the government kept on spending. In addition, imports rose to a great extent and investment in equipment and construction contributed to the positive outcome.

The International Monetary Fund (IMF) also stated that: “Employment growth is strong, the unemployment rate is at a record low, output growth is above potential and the fiscal position keeps strengthening”. Therefore, Germany is definitely contributing to the revival of the EU economy while Angela Merkel is becoming even more popular and increases her chances of being reelected for fourth consecutive term in the next German elections taking place in September.

Will the EU economy continue growing?

As the gross domestic product in the 19-country euro currency zone grew by 0.6% in the three months to June, expectations are increasing regarding the fact that the ECB will reduce the pace of the QE programme. The future of the programme is most likely to be revealed by the president of the ECB in September.

All in all, the EU economy has revealed positive growth figures during the first half of the year and seems to continue at the same pace at the rest of 2017. However, it is imperative for the EU to become more solid in order to be able to deal with crises like the one occurred ten years ago and also manage critical issues such as Brexit which could influence the EU altering the positive growth perspective.