The European Commission has significantly raised its 2021 and 2022 growth forecasts for the euro area. – ISOPIX / SIPA
The acceleration of vaccination and the relaxation of containment measures benefit growth. “The economies of the EU and the euro area should experience a strong recovery,” said the European Commission in its economic forecasts published Wednesday. The euro zone must however face a very high level of debt because of the expenditure induced by the virus, at more than 100% of its GDP for 2021 and 2022.
After an unprecedented 6.6% recession in 2020, the 19 countries that have adopted the single currency should therefore post, according to Brussels, growth of 4.3% in 2021 and 4.4% in 2022. A forecast significantly raised compared to its last estimate of February, where it forecast 3.8% for these two years.
The pre-crisis level of activity recovered by the end of 2022
“This growth will be driven by private consumption, investment and growing demand for EU exports from a growing global economy,” said the EU executive in its press release. According to Brussels, member states will return to their pre-crisis level of activity by the end of 2022, driven in particular by the European recovery plan of several hundred billion euros.
Spain (+ 5.9%) and France (+ 5.7%), particularly affected in 2020, show the highest growth rates in 2021 in Commission estimates. Growth in Germany (+ 3.4%) and the Netherlands (2.3%), slightly less affected last year, is more moderate. In the EU as a whole, the growth rate is expected to reach 4.2% in 2021 and 4.4% in 2022.
Still many risks
“There is still a lot of work to be done and many risks will weigh on us as long as the pandemic” will be there, tempered the Vice-President of the European Commission, Valdis Dombrovskis.
The European recovery plan “will contribute to the recovery and will truly change the situation in 2022, when it will bring public investments to their highest level for more than ten years”, he also welcomed.
Debt over 100% of GDP for France
Once out of the pandemic, governments will have to deal with a very high level of debt: 102.4% of GDP this year, then 100.8% in 2022 for the euro area as a whole. However, according to the budgetary rules of the Stability Pact – currently suspended because of the epidemic – the debt must in principle not exceed 60% of GDP.
This public debt is particularly high in Greece (208.8% in 2021) and Italy (159.8%). French debt is expected to reach 117.4% of GDP in 2021, then 116.4% in 2022.