The wider EU, on the other hand, is expected to improve steadily
BRUSSELS—The European Union expects British economic growth to slow as the country negotiates its exit over the next couple of years, but forecasts an improvement for the bloc as a whole despite a range of uncertainties.
In its Winter Economic Forecast released Monday, the 28-nation EU said it predicts British economic growth will slump to 1.5 percent this year and 1.2 percent in 2018 from a recent high of 3.1 percent registered in 2014.
The wider EU, on the other hand, is expected to improve steadily, with growth picking up from 1.6 percent in 2014 to 1.8 percent this year and next.
“The European economy has proven resilient to the numerous shocks it has experienced over the past year,” said EU financial affairs chief Pierre Moscovici. “Growth is holding up and unemployment and deficits are heading lower.”
For Britain, though, the report said that “economic growth is projected to moderate in 2017 and weaken further in 2018,” largely coinciding with the period during which the country is to negotiate its divorce terms with the 27 other EU nations. It acknowledged that, for this year, the impact of the leave vote was expected to be less severe than originally thought but it kept its 2018 decline intact.
Based on better-than-expected figures for Greece, Moscovici said he had good hopes that the debt-ridden country and its creditors would find a way next week to stave off another crisis. The sides disagree on whether more austerity reforms should be planned and how to ease Greece’s debt load.
Moscovici said he would be flying to Athens on Wednesday to help iron out the differences ahead of a meeting of eurozone finance ministers in Brussels next Monday.
“After years of crisis, we are building a success story, where reforms allow for a return to growth, investment and confidence,” he said.
The EU and the International Monetary Fund, which is also involved in the latest bailout for Greece, have disagreed on the country’s situation, with the Washington-based fund taking a darker view and saying its debt is unsustainable under current conditions.
Moscovici insisted it was time to stand by Greece. “We cannot add, just like that, a crisis to a context of recovery in Greece and global uncertainty. Let’s be reasonable.”
Fears are that, with President Donald Trump in office, help from the IMF for Greece could become more difficult. The U.S. is the IMF’s biggest donor and Trump has expressed doubts about Greece’s future in the euro.
Beyond difficult trans-Atlantic relations, the EU will also have a host of other uncertainties to deal with this year, mainly due to elections in France, Germany and the Netherlands.
“With uncertainty at such high levels, it’s more important than ever that we use all policy tools to support growth,” said Moscovici.
With political upheaval and support for right-wing populists brewing in many member states, Moscovici said that “we must ensure that its benefits are felt in all parts of the euro area and all segments of society.”
He said a victory of Marine Le Pen and her National Front in May’s French presidential elections would be devastating for the economy and the EU as a whole.
Le Pen has campaigned on promises to get France out of the euro currency and the EU. “It would be a tragedy for the eurozone and a catastrophe for France. When it comes to departure out of the EU, it would be pure and simple, in a certain way, the end of the European project.”