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A basket-case on wheels

Posted by Richard Saturday, October 09, 2004

A group of leading economists, forming a team known as the European Forecasting Network, yesterday reported to the EU commission that the European Union was, in effect, an economic basket case.

Despite years of efforts, they wrote, "Europe" had made little progress toward its goal of surpassing the United States in growth, innovation and productivity by the end of the decade. "There is little sign that Europe's economic decline is stopping or turning around, particularly in the large countries of continental Europe," they concluded.

With the commission's own 2004 autumn report forecasting sluggish growth of 1.9 percent for the eurozone next year as the oil shock and business gloom take their toll – downgraded from the current forecast of compared to the commission's current forecast of 2.3 percent, the economic sages added their own layer of doom about the euro. "We do not find any evidence of a pro-competitive impact of the creation of the euro area. The impact of the euro remains an open question," they concluded.

According to Ambrose Evans-Pritchard in The Daily Telegraph this admission refutes a central tenet of the pro-euro lobby that monetary union would give Europe's economy a shot in the arm by cutting transaction costs and exchange-rate risks.

Even then, the sages have not finished. Acknowledging that the eurozone's Stability and Growth Pact was "in tatters", they have also decided that the year 2000 Lisbon economic reform agenda, when EU leaders pledged to turn the EU into the "most competitive and dynamic knowledge-based economy in the world by 2010" had achieved nothing that would not have happened anyway, despite over 100 new EU directives and regulations.

"Rising unemployment has dented any enthusiasm for major change. The supply side reforms - particularly in the large countries of continental Europe - have failed to materialise. The economic reforms needed are not being implemented," they said.

In keeping with its commitment to transparency and openness, commission spokesman, Gerassimos Thomas, declined to comment on the report, saying only: "We like to encourage external forecasts on the area." Presumably, they were too busy translating "basket case" into the 20 Community languages.