Euro zone to avoid recession, stagnation risks remain: EU Commission 

The euro zone will need another year to reach even a modest level of economic growth, the European Commission said on Tuesday, calling on Germany to help as Chancellor Angela Merkel again rejected a spending spree.

The EU executive cut its forecasts, saying the euro zone economy would expand by 0.8 percent this year, 1.1 percent next year and by 1.7 percent in 2016 — a level the Commission said six months ago would be achieved next year. The delay in the upturn was due to drag on the economy from France and Italy.

“There is no single and simple answer. The economic recovery is clearly struggling to gather momentum,” the EU’s economics commissioner, Pierre Moscovici, told a news conference. Fellow European Commissioner Jyrki Katainen said Germany, Europe’s biggest economy, should invest more to help the recovery.

German economic growth will be slower than the Commission had hoped, expanding 1.1 percent in 2015, not the 2 percent level the EU executive had foreseen in its Spring forecasts.

“Germany can play a significant role in stimulating the EU and euro area economy,” said Katainen, who is the EU’s new growth and jobs commissioner. “For the sake of Germany’s own economic strength in the future, it makes sense to invest.”

But he also said Germany alone would not be enough and that all EU countries needed to reform to boost growth.

German Chancellor Angela Merkel, speaking in Berlin to Germany’s employers association, reiterated her concerns about getting deeper into debt, in what is becoming a repetitive debate on spending that divides the euro zone.

“Investment is needed but not with new borrowing,” she said.

Germany is wary of the excessive spending that caused the euro zone’s 2009-2012 banking and debt crisis, when the bloc lived far beyond its means and lost the confidence of markets.

The Commission forecasts Germany will post a budget surplus this year, a balanced budget in 2015 and another surplus in 2016, showing little appetite for more government spending.

Source: Reuters-Euro zone to avoid recession, stagnation risks remain: EU Commission

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