April 10, 2021

Political and social tension weigh on the euro zone and Brussels revises downwards the forecasts of 2019 | Economy

Political and social tension weigh on the euro zone and Brussels revises downwards the forecasts of 2019 | Economy

The notices that political uncertainties could affect the march of the great European economies ended up being fulfilled. Trade war, social instability and political tensions within the EU they underwent five tenths of growth in 2018 to the countries of the euro zone, which advanced by 1.8%. The European Commission does not expect these doubts or their effects for this year of the Gross Domestic Product (GDP). Brussels has lowered the growth forecast of the euro zone from 1.9% to 1.3%, dragged mainly by the deterioration of Germany and Italy, will be virtually stagnant with a meager advance of 0.2%. Spain stands out from the debacle and will grow by 2.1%, just one tenth less than the forecasts published three months ago.

The economic situation in Europe continues to deteriorate forecast after forecast. On the table there are no red numbers, but the continuation of a deceleration that has been occurring since last year due to a "combination of internal and external factors", according to the European Economic Forecasts of winter prepared by the Commission.

The effects of the multiple commercial battles undertaken by Donald Trump continue to come from outside, which could go a step further if this month it rejects the invitation to the Commission's dialogue and decides to impose tariffs on European cars. But Europe also accuses from abroad the weakness of emerging economies and the contraction of "global manufacturing production", which weakened world trade and particularly affected the euro zone.

The reasons for the braking, however, must also be sought within the EU: the interruption of car production in the third quarter, which the Commission notes that "only partially recovered", the "social tensions" – the crisis of the yellow vests in France- and the "uncertainty of fiscal policy in some member states". That is, Italy. "In the second half of 2018 [la desaceleración] it turned out to be more pronounced than expected, "concludes the Commission.

Weakness in Germany and Italy

This trend will continue during this year. The large economies of the euro zone will continue to lose tenths of growth. Especially Italy, which in December went into recession. If in the winter the Commission still believed that the expansive measures of the Giuseppe Conte Executive could have a minimum effect on the Italian economy, that illusion has disappeared. An anemic domestic and investment demand and political uncertainty and "rising financing costs" will drag Italy a weak advance of 0.2% for this year and 0.8% for the next.

Neither Germany and France escape this trend. The first will accuse the exhaustion of its manufacturing industry and exports, so that instead of the 1.8% expected for 2019 it will be 1.1%, while next year it will improve to 1.7%. France also sees reductions, although less, its forecasts and will grow 1.3% in 2019 and 1.5% in 2020, compared to the 1.6% expected for both years.

The great European economy that will hold the best is Spain. It showed in the last quarter with an advance of 0.7% of GDP. The Commission also lowers its prospects for this year and next, but only one tenth. Spain will suffer a slowdown in private consumption, according to the Commission, which will lead to a drop in imports. However, exports will continue to grow in 2019 and 2020, remaining one of the main engines of the economy.


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