The State of the European Union 2017

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EU ECONOMIC POLICY IN 2016. AN INCOMPLETE EMU: TOWARDS A FISCAL UNION
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The European economic agenda
As the European legislature that began in the
summer of 2014 reaches its halfway point, it is
patently clear that its lead initiative, the Juncker
Plan, has fallen short of the mark. It was a well-
meaning move in the right direction that was
nevertheless insufficient for the task at hand
and implemented too slowly. Nine years after
the onset of the economic crisis, we have yet to
fully recover. Beyond the growing inequality,
high unemployment and low growth rates we
continue to deal with, new geopolitical uncer-
tainties sparked by Brexit, political changes in
the United States and events in the Mediterra-
nean are also clamouring for our attention.
The European Commission’s autumn 2016
economic forecast1 spoke of “modest growth in
challenging times”. According to this document,
a series of negative factors are set to restrain
economic growth throughout the EU during
2017. The growth rate in the eurozone is ex-
pected to be modest despite recent labour mar-
ket gains and rising private consumption, which
according to the Commission’s analysis are likely
to be offset by various hindrances to growth and
the weakening of support factors. It is expected
that private consumption sustained by rising em-
ployment will continue to be the main driver of
European economic growth until 2018.
Insufficient support for Moscovici’s investment
plan for Europe and call for fiscal stimulus
The European Commission has attempted to
promote a European plan for investment and
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economic-performance-and-forecasts/economic-forecasts_en
fiscal stimulus on various occasions. European
Commissioner Pierre Moscovici has repeatedly
insisted on the need for measures that would
foster economic growth. The stimulus plan he
proposed in November 2016 enjoys the support
of the European Central Bank and its president
Mario Draghi, who has publicly acknowledged
that he has already done what he could to bol-
ster the flagging European economy. It must also
have the backing of the European Parliament to
go forward, but to judge from the tenor of the
December Eurogroup meeting, at which euro-
zone finance ministers rejected the Commission’s
proposal for across-the-board fiscal expansion of
up to 0.5 % of GDP during 2017 and agreed that
only member states with large budget surpluses
such as Germany and The Netherlands should be
spending more, the Council appears to be com-
pletely against the idea. In a reiteration of its sus-
tained and unquestioning support for austerity
measures contrary to the interests not only of
Spaniards but all European citizens, the Spanish
government provided no direct support for the
Moscovici plan at this meeting.
A return to policies that promote the growth,
productive investment and innovation needed
to prevent Europe from falling behind in areas
such as digitalisation and robotics is beyond the
shadow of a doubt one of the main, if not the
foremost, of the EU’s obligations to the citizens
of Europe. The degree of its willingness to ad-
dress this issue in a definitive manner will deter-
mine whether or not Europe will capable of cre-
ating quality employment going forward.
Prospects for growth
The winter 2017 economic forecast released by the
Commission on 13 February contained the warn-
ing that Europe is “navigating choppy waters”.