European Commission cuts forecasts, euro zone recovery delayed

Tue Nov 4, 2014 3:37pm EST
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By Robin Emmott

BRUSSELS (Reuters) - The euro zone will need another year to reach even a modest level of economic growth, the European Commission said on Tuesday, calling on Germany to help as Chancellor Angela Merkel again rejected a spending spree.

The EU executive cut its forecasts, saying the euro zone economy would expand by 0.8 percent this year, 1.1 percent next year and by 1.7 percent in 2016 -- a level the Commission said six months ago would be achieved next year. The delay in the upturn was due to drag on the economy from France and Italy.

"There is no single and simple answer. The economic recovery is clearly struggling to gather momentum," the EU's economics commissioner, Pierre Moscovici, told a news conference. Fellow European Commissioner Jyrki Katainen said Germany, Europe's biggest economy, should invest more to help the recovery.

Those calls were echoed by Italy's undersecretary for European Affairs, Sandro Gozi, who said the Commission's forecasts were proof that economic policies focusing heavily on budget rigor were misguided.

"Today's economic forecasts are good news because they confirm that the approach is wrong," Gozi said in Berlin.

German economic growth will be slower than the Commission had hoped, expanding 1.1 percent in 2015, not the 2 percent level the EU executive had foreseen in its Spring forecasts.

"Germany can play a significant role in stimulating the EU and euro area economy," said Katainen, who is the EU's new growth and jobs commissioner. "For the sake of Germany's own economic strength in the future, it makes sense to invest."

But he also said Germany alone would not be enough and that all EU countries needed to reform to boost growth.   Continued...

European Commissioner for Jobs, Growth, Investment and Competitiveness Jyrki Katainen (L) and European Commissioner for Economic and Financial Affairs Pierre Moscovici present the EU executive's autumn economic forecasts during a news conference at the EU Commission headquarters in Brussels November 4, 2014. REUTERS/Yves Herman