Is austerity over? This was probably the question all around the world public opinion after an evaluation on the EU-27 current situation by the European Commission was released on Wednesday. The outlook gave waivers on the budget rules to some of the most important economies in the EU. France, Spain and Poland saw an extension by 2 years of the deadline to reduce budget deficit to 3% of GDP, while Portugal and the Netherlands only obtained a one year deadline extension. Good news came also for those countries that were under the Commission surveillance for excessive deficit, among them Italy. Rome is no longer in the excessive deficit procedure (EDP) started by Brussels in 2009. Also countries like Hungary, Latvia, Lithuania and Romania were set free from EDP after accomplishing their objectives. Actually, as shown in the chart below, only six countries out of twenty-seven had no excessive deficit.
Wednesday news from Brussels means austerity lowered the deficit and budgets are bettering, though in the XXI century Europe you cannot have everything. The employment emergency is indeed the other side of the coin, together with production levels and the whole EU GDP which in the first quarter of the year went down 0.1%, which means no growth at all. German budget cuts and restrictions philosophy proved wrong and EU current recession demonstrates that deficit adjustments on their own cannot stimulate growth.
Certainly, governments bond spreads with German bund are definitely better than were a couple of months ago for Greece (765), Portugal (404), Spain (285), Italy (261) and Ireland (215). But this does not mean the emergency is over. Unemployment rate and EU biggest countries domestic product show how deep the recession is in our continent. For this reason, Brussels warned France and Spain to pursue new pension and labour market reforms, while UK was urged to speed up its cuts, although the positive outlook on the GDP for the next years. But with no ambitious plan to deeply reform the Union, these look like sterile recommendations. Things thus standing, it seems that the worst is yet to come.
Certainly, governments bond spreads with German bund are definitely better than were a couple of months ago for Greece (765), Portugal (404), Spain (285), Italy (261) and Ireland (215). But this does not mean the emergency is over. Unemployment rate and EU biggest countries domestic product show how deep the recession is in our continent. For this reason, Brussels warned France and Spain to pursue new pension and labour market reforms, while UK was urged to speed up its cuts, although the positive outlook on the GDP for the next years. But with no ambitious plan to deeply reform the Union, these look like sterile recommendations. Things thus standing, it seems that the worst is yet to come.
AV
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