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eurozone economy is projected to shrink at 0.4% this year, with particular weakness in private consumption and investment;
  • eurozone is projected to reach a structural surplus this year in a steadily improving trend that shows that austerity is projected to continue;
  • the EU Commission's Spring forecast shows Spain's structural deficit worsening from 2013 to 2014;
  • expects Spain to transition from net borrower to net lender in 2013;
  • expects Italy’s structural balance to improve, but for debt to rise to well above 130% of GDP;
  • Commission revised upwards Irish deficit citing rejected wage agreement as one of the contributing risk factors;



The Commission forecasts for Spain, Italy and Ireland

The European Commission’s spring economic forecast foresees a continued recession in the eurozone this year, with projected growth of -0.4%, after -0.6% last year. The main drivers of the downturn are private consumption, -0.9%, and investment, -2.6%. The only one positive factor was exports, which were up 2.2% eurozone-wide. Unemployment is projected to rise from 11.4% in 2011 to 12.2% this year.

As a metric of austerity, here is the aggregate eurozone primary balance:












Most of the austerity has taken place during 2011-2013. For the full forecast, see here. We picked out some of the highlights for Spain and Italy.


On Spain:

For Spain, the forecast for GDP is -1.5%, slightly worse than the Spanish government’s forecast. The unemployment rate is projected to reach 27% this year, falling marginally to 26.4%, but with zero employment growth. The current account balance is forecast to have swung from -0.9% to +1.6% this year, and to 2.9% next year. Interesting is the forecast for the structural deficit: after an improvement from -5.5% to -4.4% this year, it is projected to rise to -5.5% next year.


On Italy:

The forecast for GDP growth is -1.3% this year, with a big swing in the current account balance from -0.5% to +1% this year. The structural balances improves from -1.4% to -0.5%, with gross debt rising to 131.4% in 2013 and 132.2% in 2014.


on Ireland:

The spring report expects Ireland’s deficit to reach 7.5% of GDP this year, higher than the February estimate of 7.3%. The Commission cites the rejection of the Croke Park wage agreement by unions, higher than expected costs involved in liquidating the Irish Bank Resolution Corporation and the payment of dividends on the government’s preference shares in AIB as risks to the Irish deficit reduction plan this year, according to the Irish Times.

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07.05.2013 09:23 pm

This quote from the Commission's report seems to me to indicate the EC is following the same old neoliberal idea of 'more austerity'.


"High unemployment points to the need for continuing the course of structural reforms. Moreover, in a still fragile macro-financial context, it is essential to dispel doubts about the implementation of crisis resolution measures and structural reforms, which could result in another flaring-up of the crisis. Therefore, it is of the utmost importance to press ahead with the implementation of the Banking Union in order to overcome financial fragmentation as part of completing the architecture of EMU, facilitate structural adjustment and unlock domestic demand. By moving forward with the necessary reforms, the EU and the Member States can create the conditions for the improved financial market situation to feed through to growth in the real economy..."


This is just more of the same old 'hang in there' philosophy that Draghi, and the Germans have been preaching for 3 years. It won't work.

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