The EU is doing better economically and is now less worried about recession

It has been a long, dark winter characterized by the war in Ukraine, inflation and high energy prices. But now the fear of a recession in the EU is diminishing. The EU Commission assesses that.

On Wednesday, the EU Commission presented its spring forecast, in which they instead expect modest growth both this year and next year.

The EU Commission expects growth of 1.0 percent in 2023 and 1.7 percent in 2024.

At the same time, it is expected that inflation in the EU will fall from 9.2 percent in 2022 to 6.7 percent in 2023. And in 2024 reach a more manageable level of 3.1 percent.

According to Senior Vice President of the European Commission Valdis Dombrovskis, the EU’s economy is thus surprisingly strong, even though Russia’s invasion of Ukraine continues.

– Energy prices have fallen significantly, and a strong labor market with record low unemployment has helped strengthen our economic resilience, says Valdis Dombrovskis.

Dansk Industri (DI) sees the figures as an indication that the EU has come through the winter better than feared. But they are not an expression of “notable” progress in the European economy, says Allan Sørensen, chief economist at DI.

– Despite a minor upward adjustment, the growth will not be particularly impressive. It is especially the high inflation and the massive interest rate increases that are taking the momentum out of the European recovery, says Allan Sørensen.

While overall inflation is expected to fall, core inflation is more stubborn, warns the EU Commission. This excludes certain price-sensitive goods such as energy and unprocessed food.

– It affects citizens’ purchasing power. Especially for people with lower or middle incomes. And that damages the competitiveness of the companies in the EU. That is why it is important that the EU countries coordinate their policies within the economy and the labor market, says Valdis Dombrovskis.

The EU Commission is therefore proposing that the EU countries spend less money this year and next year. It is necessary after large discharges as a result of corona, the war in Ukraine and energy aid for households and companies.

However, the Danish economy is so strong that the EU Commission simply encourages Denmark to continue its economic policy next year. Only five countries in the EU get that recommendation, while the rest are encouraged to tighten their fiscal policy.

The EU Commission has a critical eye on heating checks and other energy aid. It is both expensive for the Member States and contributes to increasing inflation. Therefore, the programs should be shut down in light of the lower energy prices, the EU Commission believes.

At the end of 2023, the EU countries can no longer hide behind a special clause which, as a result of corona and war, has allowed them to spend extra money for a period. From next year, the EU Commission will start enforcing the EU rules on public debt and deficit.

Here, the EU Commission has recently presented a proposal which should provide more flexibility to help the countries bring down the debt. In return, the EU Commission will make more cash demands on the EU countries to ensure that the economy is brought under control.

/ritzau/