EU forecasts more economic growth

The spring forecast of the EU Commission has turned out to be promising. Strong economic growth is said to create 3.6 million new jobs in 2006 and 2007 in Europe. According to the Commission, European entrepreneurs would increase investment in production lines thereby receiving lucrative orders from abroad. Even from Germany positive impulses are to be expected.

In 2006 the economy of the EU will grow by 2.3 percent and by 2.1 percent in the Euro-zone. Although an internal gross product (⇒ Wikipedia) of 2.2 percent in the EU and 1.8 percent in the Euro-zone in 2007 will be less than expected, a decrease in the unemployment figure from its highest level of 9 percent in 2004 to 8.2 percent next year is forecast. However, the umemployment rate will only fall slowly.
For the global economy the Commission forecasts a growth of 4.6 percent in 2006 and 4.3 percent in 2007. Europe would benefit from the increasing internal demand. In particular investments in machines and equipment is said to rise by approx. 5 percent and 4.5 percent in 2006 and 2007 respectively. Inflation would remain stable at just above 2 percent. The most dangerous factor for sustained economic growth was the impredictability of the oil price.

The economic situation of Germany would improve. A growth rate of 1.7 percent in the current year was already a good sign which would lead to Germany playing an active role in the overall economic growth in Europe. The increase of VAT in 2007, however, might very soon have kind of negative effect on growth.

The decision of the German Finance Minister to increase VAT is said to have the backing of the Commission: The effect on growth in 2006, 2007 and 2008, according to the Commission, would be unimportant. It is assumed that the Commission will suspend the deficit proceedings in July, if it can be expected that a new indebtedness of 2.5 percent in 2007 will be markedly lower than the limit of 3 percent of gross domestic product. The complete spring forecast (in PDF format of 1.3 MB size) is available on the European Commission´s Internet portal. GERMAN