The European economy is facing a challenging period as it recovers from the impact of the Covid-19 pandemic and the uncertainty of Brexit.
In this post, of the section Stiri Economie of the
site VoceaEuropei.com we will explore some of the key trends and developments that are shaping the economic outlook for the continent.
One of the main drivers of the European recovery is the Next Generation EU (NGEU) fund, which is a €750 billion stimulus package that aims to support the green and digital transitions, as well as social and territorial cohesion. The fund consists of grants and loans that will be distributed to member states based on their recovery and resilience plans, which outline their priorities and reforms for the next six years. According to the European Commission, the NGEU fund could increase the EU’s GDP by up to 2% by 2026 and create up to 2 million jobs.
Another important factor for the European economy is the trade relationship with the UK, which left the EU in January 2020 and entered a transition period until December 2020. During this time, the UK and the EU negotiated a trade and cooperation agreement (TCA) that came into effect on January 1, 2021. The TCA provides for tariff-free and quota-free trade in goods, as well as cooperation in areas such as security, energy, transport, and fisheries. However, it also introduces new barriers and frictions in trade, such as customs checks, regulatory standards, and rules of origin. According to the European Commission, the TCA could reduce the EU’s GDP by 0.5% by 2030 compared to a scenario where the UK remained in the EU.
A third aspect of the European economy that deserves attention is the inflation rate, which has been rising sharply in recent months. In October 2021, the annual inflation rate in the euro area reached 4.1%, the highest level since 2008. The main causes of this surge are supply chain disruptions, higher energy prices, and base effects from low inflation in 2020. The European Central Bank (ECB) expects inflation to peak in late 2021 or early 2022 and then decline gradually as temporary factors fade away. The ECB has maintained an accommodative monetary policy stance, keeping its key interest rates at record lows and continuing its asset purchase programs.
In conclusion, the European economy is on a path of recovery but faces several challenges and uncertainties. The NGEU fund offers a unique opportunity to boost growth and resilience, while the TCA with the UK poses new difficulties for trade. The inflation rate is expected to moderate in the medium term, but requires close monitoring by the ECB. The future of the European economy will depend on how well it can adapt to these changing circumstances and seize new opportunities.
