Europe grows but lacks necessary reforms

The EU economy will grow about two percent this year. Thus, it reached its peak last year with 2.4 percent. Even though the economy will continue to grow moderately, it lacks necessary reforms. Therefore, the focus of the Econ Jour Fixe, a regular meeting of EU economists from business federations, trade unions, European and international institutions as well as think tanks, was on those countries currently implementing structural reforms.

The industrial production of the European Union is still one percent above the prior-year figure. Since June 2018, the production has been declining and dampened export expectations will further curb growth. Fortunately, the unemployment rate in the EU is for the first time under its pre-crisis level amounting to 6.8 percent. The rate in the euro area is slightly above with 8.1 percent. This reinforces the lack of skilled labour which will be an obstacle for companies’ expansion plans.

Structural reforms urgently required

Similar results are provided by the German Economic Institute (IW Köln), a German think tank that revised previous economic forecasts downwards. The experts at the Econ Jour Fixe identified numerous challenges for the European economy such as the instability in emerging countries such as Turkey and Argentina, a hard Brexit, a potential government debt crisis in Italy as well as the US trade policies. Greece’s financial situation is still problematic, too. Facing these challenges, the participants agreed upon the need for structural reforms within the member states and the EU in order to be prepared for a future shock. Nevertheless, the enthusiasm for reform is limited.

Moreover, labour mobility has been addressed in the meeting. The latter is relatively weak in comparison to the US. Finally, a resilience mechanism on the European level has to be established. This is particularly true for the European Economic and Monetary Union (EMU) - its completion has long been advocated by the BDI.

The European elections 2019 will be decisive

The last point of the discussion were the European elections in May 2019. They are decisive for the direction the EU will follow: either a sovereign and strong EU or weak national states not being able to compete with the US or China. European businesses should engage in promoting a strong Europe, multilateralism and an open, liberal trade order. Therefore, companies should intensely defend these positions in public.