Hope for Europe as Commission looks to growth

The European Commission has raised its growth predictions for the UK and the eurozone. Is Europe’s financial fortune changing for the better? …

There has been plenty of doom and gloom across the EU in recent years. The global financial crisis took its toll on all 27 nations of the bloc and of course, bailout deals proved that some fared worse than others.

While the UK has not suffered to that extent, businesses and consumers have all felt the squeeze, and so have citizens across Europe – which makes the news the European Commission has upped its predictions for UK and eurozone growth in 2014 particularly encouraging.

In its winter forecast, the Commission says it now expects the UK to grow by 2.5 per cent over the course of this year, compared to the 2.2 per cent predicted in November. Although the projection for 2015 was unchanged at 2.4 per cent, it seems unlikely that growth will be expected to slow down after a relatively brief expansion, so there might be some room for manoeuvre for future revisions too.

Growth in the UK is still expected to far outstrip that of its European neighbours. But the 17-nation eurozone is now anticipated to grow by 1.2 per cent this year, largely down to a big leap in Spain’s fortunes. Having given all of Europe a fright with its troubles in the past few years, an increase from 0.5 to one per cent in the eurozone’s fourth-biggest economy is definitely welcome.

Even though the Commission only increased its prediction by 0.1 percentage points for the eurozone as a whole, in a bloc which has struggled in recent years, it’s still very much a positive sign.

Since the eurozone is still the UK’s largest trading partner, growth in that market can only be a good thing for British businesses – especially if they’re looking to grow or start exporting.

Inevitably, the news of higher growth expectations does come with a few warnings. Some countries will grow faster than others within the eurozone, while in the UK recovery still depends heavily on domestic demand. The Commission has warned against slight wage growth and early interest rates rises if the UK wants to keep growing.

But for now at least, it looks like the UK and eurozone are both set for happier times ahead.

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