44 / 150
THE STATE OF THE EUROPEAN UNION
44
Although this report stated all member
states are poised to grow in 2016, 2017 and
2018, it also admitted, “the outlook is sur-
rounded by higher-than-normal uncertainty”. It
is anticipated that unemployment will fall but
remain above pre-crisis levels. Private consump-
tion is expected to rise and investment will
grow, albeit at a subdued pace.
The European Commission forecasts that
GDP will grow by a modest 1.6 % in the euro-
zone during 2017 and 1.8 % in 2018. The EC’s
winter economic forecast nevertheless enumer-
ated a litany of downside risk factors threaten-
ing to affect results for this period that included
“risks to the growth outlook stem from legacies
of the recent crises; the UK’s vote to leave the
European Union; potential disruptions to trade;
faster money tightening in the United States,
which could have a negative influence on
emerging market economies; and the potential
consequences of high and rising debt in China”.
The Commission also predicts a rise in infla-
tion and prices after
three years of relative de-
cline and stagnation, a shift mainly driven by an
upswing in energy prices. Inflation is expected
to reach new levels although fall short of the
target figure of “below, but close to 2 % over
the medium term” defined by the European
Central Bank as price stability.
The need to make the EMU a true
monetary and fiscal union with policy
mechanisms such as a banking union and a
common labour policy
Towards a fiscal union
Economic theory and history have long indicat-
ed that monetary unions bereft of compensa-
tory fiscal policies are unsustainable due to the
need to address crucial aspects of economic
policy such as stabilisation and redistribution.
One of the main reasons (if not the only rea-
son) why the economic crisis has lingered so
long and done so much damage here in Europe
and particularly in eurozone countries is our lack
of a common fiscal policy
2
. To date, Europe has
been unable to implement countercyclical stabi-
lisation measures geared to remedy the prob-
lems of individual countries or economies sub-
ject to asymmetric shocks such as the burst of
the construction bubble in Spain or, to provide
another example, the sovereign debt crisis in
Greece.
Disputes arising between supposed debtor
and creditor countries over economic imbal-
ances within the EMU that have not been strict-
ly fiscal in nature (an unsustainable balance of
payment deficit in Germany’s favour being one
example) have done nothing but add fuel to the
fires of nationalism, weaken the future pros-
pects of the European project and derail Euro-
pean economic growth.
There have been enough highs amidst the
lows to keep hope alive. Although the process
has been unnecessarily slow, the creation of the
banking union not only
signals the need to move
forward with the development of fiscal instru-
ments that would institutionalise solidarity be-
tween member states but also, to a certain ex-
tent, represents a step in the direction of full
fiscal union. The fact that the Juncker Plan has
demonstrated once again that community budg-
ets can be used to guarantee bonds issued by the
European Investment Bank as a means of project
financing is also interesting, as it suggests the
possibility of issuing community bonds as well.
2
Fernández, J.: “Hacia la unión fiscal en Europa”,
Temas
para el Debate
no. 266-267, February 2017.