EU finance ministers must achieve breakthrough on EMU completion

Growth at risk due to trade tensions, no-deal Brexit, tax uncertainty

Today, BusinessEurope published its Spring Economic Outlook 2019. While EU finance ministers meet in Luxembourg today, BusinessEurope is underlining the importance of completing the Economic and Monetary Union (EMU) and strengthening long-term economic growth.

Publishing Spring Economic Outlook 2019, BusinessEurope Director General Markus J. Beyrer said: “EU finance ministers meeting today must demonstrate their commitment to enhancing the business environment, raising productivity growth and proving to our international partners that the EU has a growth model that can withstand a fall in global trade. In particular, we urge ministers to agree on the details of the proposed euro area budgetary instrument for convergence and competitiveness. Such an instrument, which should be developed to combine a commitment to supporting structural reform, with a stabilisation function, whilst limiting moral hazard, could improve the resilience of the EU economy. We call on ministers to demonstrate clear progress on the completion of both, the banking and capital markets unions. In particular, it is important that a clear roadmap is published for the implementation of an EU deposit insurance scheme.”

According to BusinessEurope’s outlook, the recent downturn highlights the fragility of the EU economy:

• EU economic growth fell considerably in the second half of 2018;
• We expect for 2019 GDP growth of 1.6% in the EU and 1.3% in the euro area, considerably lower than our autumn forecast;
• Following tentative signs of a rebound in growth already in Q1 this year, we expect growth to pick up in 2020 to 1.7% in the EU and 1.5% in the euro area.

Risks to the outlook remain on the downside, with the continuing possibility of a damaging, no-deal Brexit and the recent escalation of trade tensions, particularly between the USA and China. These are increasing concerns for EU businesses. Our outlook also shows that uncertainty over tax levels is increasingly seen as a risk by business, and in turn a dampener on investment plans.