Amidst slower economic growth, weaker confidence and investments, the European Union is urging member states to make reforms to their economies to accelerate growth and be in a better place to ward off the risks related to the US-China trade war, Brexit and the troubles with the Italian economy. International organizations such as OECD and IMF have already started pushing their member states to balance their public accounts and boost their growth potential with reforms “while the sun is shining”.
“The impact of the slowdown will depend on the policy action,” EU Commission Vice-President for the Euro, Valdis Dombrovskis, commented. “We need well-targeted investment and reforms to ensure we enjoy a long-lasting growth”. The EU executive looked into the macroeconomic imbalances of the 28 member states and the national governments will follow by handing in by the end of April their stability and convergence programs to address the issues identified by the Commission. Based on the analysis of the national plans, the Commission will issue recommendations for each individual member state to reform their economies and adjust public accounts.
Overall, there is a lot of pressure being put on Germany – Europe’s economic powerhouse. Although the country is fiscally healthy, Berlin is not willing to spend and is being blamed for contributing too little with its internal demand. “While a number of measures have been taken to strengthen private and public investment, more efforts are needed to clear the large investment gap particularly as regards public investment in infrastructure and education,” the Commission said in the report. Although the domestic demand went up compared to 2018, investment and consumption as share of GDP have not been dialled up and wage growth is slow.