How is the economy of Europe

Europe's economy is expected to grow strongly

According to calculations from Brussels, Europe can hope for a rapid economic recovery from the Corona crisis. "The EU is now forecast to recover to the pre-crisis level in the fourth quarter of 2021," said EU Economic Commissioner Paolo Gentiloni (see article picture) on Wednesday. According to the EU Commission's spring forecast, the debt ratio of the countries in the euro zone is expected to reach a new high at over 102 percent of economic output.

The Commission increased its growth expectations for 2021 for all 27 EU countries to 4.2 percent. In February she had assumed 3.7 percent here. The prospects for 2022 also improved further from 3.9 percent growth to 4.4 percent.

With its forecast, the Brussels authority is now closer to the forecast of the International Monetary Fund (IMF), which is forecasting GDP growth of 4.4 percent in the euro zone this year.

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Pre-crisis level faster than expected

Brussels had previously assumed that the EU economy would not reach pre-pandemic levels until 2022 at the earliest. In a statement, the authority referred, among other things, to the increasing vaccination rates and easing of the corona restrictions. The growth is "driven by private consumption, investments and an increasing demand for EU exports from a strengthening global economy".

Economic Commissioner Gentiloni named the surprisingly rapid recovery of the global economy and the EU's Corona reconstruction fund as the main reasons for the expected positive development. Thanks to the 750 billion euro fund, public investment in relation to economic output could therefore reach the highest level in over ten years in 2022.

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According to the commission, Spain can hope for the strongest economic growth: almost six percent in 2021. France is also facing an upswing of 5.7 percent. Less growth is expected in the Netherlands (2.3 percent) or Germany (3.4 percent). Here, however, the slump in the Corona year 2020 was also much more moderate.

The Federation of German Industries (BDI) expects the economy to pick up significantly this year. "We expect production in the manufacturing sector in Germany to increase by eight percent in 2021," said BDI Managing Director Joachim Lang on Wednesday. This will end the longest recession in German industry that has lasted for more than two years this year. According to the BDI industry report, production in Germany fell by 9.8 percent in the previous year.

Debt rises to a record high

The debt of the EU member states is meanwhile on the way to a new record high. By 2020, the total debt of the euro countries had already reached 100 percent of economic output. The commission assumes a further increase in the debt ratio to 102.4 percent before falling slightly again to 100.8 percent in 2022. The expected total debt of all EU countries is slightly lower at 94.4 percent of economic output.

Greece is still deepest in the red, with total debt expected in 2021 to amount to 208.8 percent of its gross domestic product. In second place is Italy with just under 160 percent, followed by Portugal with a good 127 percent. In Spain, France, Belgium and Cyprus, the debt burden also exceeds economic output.

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Brussels also expects unemployment to peak in the crisis in 2021. For the entire EU, the Commission expects an increase to 7.6 percent from 7.1 percent in the previous year. According to the forecast, the situation on the labor market will ease somewhat in 2022, but unemployment will not yet return to the level it was before the pandemic.

Pandemic risks remain

Overall, the Commission provides its forecast with a clear warning: "The risks to the outlook are high and will remain so as long as the shadow of the COVID-19 pandemic hovers over the economy." The development of the infection process and the vaccination campaigns "could be better or worse than assumed in the central scenario of this forecast".

ul / hb (afp, dpa, rtr)