Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

EC Sees Fiscal Upturn, Currency Plan on Track

BRUSSELS -- The European Commission said Wednesday that meager economic growth in Europe this year would improve and that a "significant number" of countries were still on track to adopt a single currency in 1999.


It also said France and Germany -- the linchpins of monetary union -- would get their deficits to or below the key figure of 3 percent of gross domestic product in time to qualify.


In its spring economic outlook, the commission said growth in the 15-nation bloc this year would be just 1.5 percent, but that it would climb back to 2.4 percent in 1997.


"Signs are emerging that the decline in economic confidence may have come to a halt and may be picking up again in a number of countries," it said in a statement.


Slumping growth had thrown into question the ability of European Union countries to trim their deficits to 3 percent of GDP, one of the key fiscal tests for adopting the Euro, as the currency is to be known.


Germany and France were widely seen as failing the test in 1997, but the commission's figures suggested otherwise.


France would have a deficit to GDP ratio of 3 percent next year and Germany's would be 2.9 percent, the commission said.


EU Monetary Affairs Commissioner Yves-Thibault de Silguy said that all the forecasts showed that economic and monetary union, or EMU, was on track and that the timetable was "realistic."


"I am convinced that a significant number of member states will fill the necessary conditions to switch to the Euro on Jan. 1, 1999," he said.


Denmark, Ireland and Luxembourg were expected to achieve a qualifying deficit to GDP ratio this year. They would be joined by Germany, France, the Netherlands and Finland in 1997.


Six other countries -- Austria, Sweden, Belgium, Spain, Portugal and Britain -- would be close.


Denmark has opted out of joining a single currency and would need a referendum to reverse its decision. Britain has the option of participating. Given the bloc's economic woes, however, some financial analysts had already criticized the figures for France and Germany, which were leaked earlier to a German newspaper.


"Neither of these forecasts looks at all realistic, and look designed most of all to ward off any fears that EMU [economic and monetary union] may be delayed," Chase Investment Bank said in its daily market brief. The commission said that for 1997 it had included countries' latest budget plans, including Germany's 50 billion Deutsche mark ($30 billion) savings plan which has yet to be approved by the parliament.


Many analysts believe there is a political will in the EU to adopt a single currency and that it will happen regardless of strict adherence to the EMU criteria.


In other economic indicators, the commission said inflation was under control in most EU countries and should be at about 2.5 percent on average next year.


Unemployment remains a big problem, however. The jobless rate for the bloc as a whole next year was seen dropping to just 10.8 percent from this year's 10.9 percent.