Wednesday 21 February 2018

Brussels says growth to miss 0.7pc target of Government

Ireland avoids double-dip recession and outstrips states stuck in freefall, but jobless rate still among EU's highest

European Economic and
Monetary Affairs
Commissioner Olli Rehn
presents the EU Commission's
interim economic forecast in
Brussels yesterday
European Economic and Monetary Affairs Commissioner Olli Rehn presents the EU Commission's interim economic forecast in Brussels yesterday

Sarah Collins in Brussels

IRELAND has managed to shirk the double-dip recession gripping the eurozone, with the economy set to expand by 0.5pc this year, according to the European Commission's latest economic forecast.



But ratings agency Fitch last night warned that Ireland was on a list of eight countries that would be at "the most immediate risk" of a downgrade if Greece exits the eurozone

The EC's figure is lower than the Government's prediction of 0.7pc but outstrips other bailout states and larger countries such as Italy and Spain, whose economies are still in freefall.

"Ireland has been able to return to current-account surpluses and is already in positive growth territory," the commission's economy chief Olli Rehn said yesterday.

He said Irish wages had shown a "remarkable adjustment", with sharp reductions in the cost of hiring workers, making the country more attractive to foreign investors.

However, the jobless rate is to remain among the highest in Europe at 14.3pc this year, falling to 13.6pc in 2013. The EU average is 10.3pc and Mr Rehn said the bloc was in for "a mild but short-lived recession".

Exports

Irish growth is to spike to 1.9pc in 2013, the commission said -- a slightly lower estimate than the Government's 2.2pc -- and will be based mainly on exports rather than consumer spending.

The report reveals the Government is set to meet its bailout commitments this year, with the deficit coming in at 8.3pc of GDP, well below the 8.6pc target.

Education Minister Ruairi Quinn, who was in Brussels to meet his EU counterparts yesterday, said the results showed "stability is working; we're on track; unemployment has been stabilised".

Ireland's outlook contrasts starkly with crisis-riddled Greece, which is enduring a fifth straight year of negative growth and is facing an economic contraction of 4.7pc this year.

Portugal will see a 3.3pc dip, while Spain's economy will shrink by 1.8pc. Spain is the only EU country that is set to remain in recession into 2013, the commission says.

Mr Rehn told Spain to get a "firm grip" on spending in its autonomous regions and to put to bed any concerns surrounding its ailing banking sector.

Italy and the Netherlands are also in recession this year, while growth is slowing in France and Germany, but will recover next year. The bleak environment has spurred a call for more money to be pumped into the economy, a call which until recently has been vehemently resisted by Germany.

But the rise to power of French President-elect Francois Hollande and a swing to the left in key German states has shifted Chancellor Angela Merkel's strict focus on curbing spending.

Mr Rehn yesterday urged governments to unlock extra capital for the European Investment Bank and release €230m from the EU budget for a series of "project bonds", which it is hoped will attract up to €4.5bn from private investors for key road, rail, energy and broadband upgrades across the EU.

He stayed on-message on austerity, however, saying that investments should not endanger deficit targets.

"We need these kind of measures in order to boost sustainable growth and jobs creation in Europe, in parallel with continued fiscal consolidation," he said.

"We cannot pile debt over debt, and it is essential that we are continuing fiscal consolidation and staying the course," he said.

Irish Independent

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