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EU-EUROZONE-GROWTH
EU slashes eurozone growth forecast as Germany cools
BRUSSELS, Feb 8, 2019 (BSS/AFP) – The European Commission sharply cut its
eurozone growth forecast for 2019 on Thursday as an unexpected slowdown in
Germany and protests in France weigh on the economy in Europe.
The EU also cut Italy’s growth rate to a five-year low, a situation that
risks reopening bitter differences between Brussels and Rome about the
government’s spending plans this year.
The commission, the EU’s executive arm, is now expecting growth of 1.3
percent in the eurozone this year, a significant cut from 1.9 percent
predicted in November.
It said the full European Union would grow by 1.5 percent instead of the
earlier 1.9 percent.
The health of the German economy is fast emerging as a worry for the EU as
slumping demand for foreign cars in China takes a toll on Europe’s export
powerhouse.
The commission said Europe is facing international headwinds that have now
taken the steam out of a post-crisis recovery in the eurozone.
The slowdown “reflects external factors, such as trade tensions and the
slowdown in emerging markets, notably in China,” said European Commission
Vice President Valdis Dombrovskis.
“The possibility of a disruptive Brexit creates additional uncertainty,” he
added.
Another problem is Italy, which the commission said would grow by a paltry
0.2 percent this year, still better than a recession, but a huge cut from the
1.2 percent forecast late last year.
Slower growth spells big trouble for populist-led Italy, where huge amounts
of government money are swallowed up each year to help pay down about two
trillion euros in public debt.
Rome’s coalition government of the anti-establishment Five Star Movement
(M5S) and the League party was already forced to water down its ambitious
budget in December to avoid being punished by the EU Commission and financial
markets.
The latest growth forecast may force Italy to again review its spending
plans for 2019 in order to satisfy Brussels and assuage investors.
“The commission will continue to monitor closely the situation in Italy,”
said EU Economic Affairs Commissioner Pierre Moscovici, who handles the
fraught negotiations with Rome.
Moscovici, a former French finance minister, warned that France was also
caught in the cooldown, especially after a wave of “yellow jacket” protests
hit the country in December.
In France, the European executive now expects growth of 1.3 percent in
2019, compared to 1.6 percent in its autumn forecasts.
BSS/AFP/HR/1000