EU economic recovery prospects

2009-12-8, internationally renowned Fitch international credit rating co., Ltd. will Greece sovereign credit level from A-down to BBB +, then 16, another renowned rating agencies Standard & Poor's company also on Greece's sovereign credit rating from A-down to BBB +. This is Greece over the past 10 years the first sovereign level is reduced to A level below. As early as January 2009, Standard & Poor's has dropped several EU countries sovereign credit rating, Portugal, Spain, Greece and Ireland are regarded as such, has also been lowered credit Outlook level from "stable" rounded down to the "negative". The EU Member States sovereign credit level is lowered heralds the economic situation in the European Union. But the Prime Minister of Sweden, said that on the night of 22 Greece economic crisis will not give the euro brings pressure, Greece should earn a to consolidate financial.

Financial crisis-ridden EU sapped

Europe is heavily hit by the financial crisis. When the United States in the second half of 2008 subprime mortgage crisis evolved into a global financial crisis, the EU Member States and some of the Baltic and East European countries that suffered the impact of the first wave, Latvia, Estonia and Lithuania in the face of sudden withdrawal of foreign capital in the context of the domestic financial system after almost failed, in the EU, the International Monetary Fund, with the assistance of the stay. Hungary, Bulgaria, Romania has capital flight, the collapse of the currency exchange rates, the EU is the establishment of a special financial assistance fund to help these countries through.

Because of the suffered a severe financial crisis, the EU is not possible to introduce efficient response to the financial crisis and integrated measures, it is impossible to help those who are troubled by the weak economic situation in the poorer countries and countries emerging from crisis quickly. EU's economic stimulus plan is far less than the size of the United States, but also much later. National economic issues finally had to rely on their own, this is also the economic strength of those traditionally weaker southern European countries and the new EU members financial situation deteriorated faster, sovereign level is one of the main reasons for the decline.

European economic dependence on the United States is very high, there was a time when European scholars think that the European economy has severed ties with the United States, the growth momentum has no longer rely on the United States, for European exports to the United States market reduce dependence. If the proportion from trade, the United States as Europe's biggest trade partner of the proportion of trade has indeed falling. In 2004, EU exports to the United States to the EU of goods exports by 24%, 2008 this proportion decreased to 19%. But the absolute volume of exports to the United States on the EU's goods is increasing, from 2004, 2355 million euros to the 2007 2613 billion euros, the United States remains the EU's largest market. Financial crisis makes 2008 EU exports to the United States reduced to 2494 million euros. 2009 January-September of commodity exports to the United States further reduced by 20%. The negative impact of the EU economy is clear, the United States sneezes, the EU influenza is not strange.

European economic recovery by the four factors

With the advent of economic recovery, the EU should have from the recession of quagmire out quickly, but the EU countries for a long time in the political and economic problems in the crisis worsened, haunt the EU economic recovery. If the EU cannot devote to effectively solve these problems, the development prospects of the EU economy is difficult to be optimistic.

First of all, the labor market rigidities leading European industrial competitiveness decline is a long-standing EU countries headache, it weakened the EU cost control capacity and competitiveness, to the EU economy took a serious negative impact. EU countries in recent years has been trying to reform, some Member States have adopted many measures to enhance labour market flexibility, but often met with trade union organizations of opposition and resistance from some countries or even political crisis. After the outbreak of the financial crisis, the EU countries are facing pressure to further increase of unemployment, unemployment rate increased in most countries as a two-digit, Spain is as high as 19.3%. Serious unemployment rate makes the original reform will not be able to implement, while curbing the increase in unemployment rate makes the consumer economic recovery more difficult. Strike of frequent eruptions has to a certain extent enable the efficiency of the economy suffered serious damage.

Secondly, the EU adopted in 1997, the steady growth of the Convention (hereinafter referred to as the "Convention"), the lack of flexibility, but also restricts the use of fiscal policy in the European Union to stimulate the economy of space. The provisions of the Convention to participate in the euro countries to the annual budget deficit cannot exceed 3% of GDP and total debt of Governments cannot exceed 60% of GDP. This provision is in fact in the unified national monetary policy, but also essentially limits the operation of national fiscal policy. Although there are Member States complained constantly, trying to reform the above provisions, the European Union in March 2005, also reached an agreement on the implementation of the Convention and the agreement on the increased flexibility, but the basic principles of the Convention has always been the majority of EU Member States, especially the core Member States persist. Therefore, when the financial tsunami, the European Union is always better than other major economies in taking measures to stimulate the economy slow-shoot on the scale are much smaller. On the basis of economic recovery have not yet been firmly when European countries first consider withdrawing from the stimulation of the policy.

Third, the EU country of mercantilism traditions and strategic short makes the comparative advantages of the EU economy could not be fully realized. The EU has been trying to keep up on the external trade balance, even in 2009, the economic recession, the EU's 27 countries, 1-10 months on EU trade only 939 million euros, compared to 16 countries in the euro area on the EU's trade surplus with 174 million euros. Some countries in order to control the trade deficit or protect their so-called jobs simply to have lost the comparative advantage of some of the traditional industry for Government support and trade barrier protection, makes the transfer out of the industry would have continued to inefficiencies in the EU's internal operations, resources and funds will not be able to configure to more efficient industry, cannot achieve comparative advantages brought by the welfare gains. Originally with second only to the US dollar's second largest international currency, the euro, EU countries

Home can definitely make the euro more shoulder international monetary responsibility sharing international currency gains, however, because EU countries take a short-sighted protectionist trade policies, has limited the adoption of deficit to output the size of the euro, the euro in international reserve currency proportion is always maintained at 25%, only Germany mark plus francs in primary reserve currency in slightly higher. It is for this reason, the euro against the US dollar exchange rate rising, making the EU's exports.

Finally, the interests of the EU's internal differences between countries in enlargement after further expand, making the EU economic development policies is difficult to enforce. 1 May 2004 the European Union to complete the fifth enlargement, Estonia, Latvia, Lithuania, Poland, Czech Republic, Slovakia, Hungary, Slovenia, Malta and Cyprus in the accession of 10 countries, 1 January 2007 Bulgaria and Romania join the European Union, to the EU Member States up to 27 countries. Continuous enlargement of the EU makes the EU has achieved geopolitical interests of the countries of Central and Eastern Europe, the EU expects the political direction of the development of a system of protection. However, the increase in EU Member States, in particular, some level of economic development and a large gap between Western Europe and Eastern European countries, the EU integration process further deepening becomes more difficult, by deepening the integration to promote economic development is gradually diminished. When external financial crisis hit, the EU's political first lack of seriousness of the crisis and the dangers of common understanding and taking action against the common sense of crisis, the impact of the Baltic States as well as serious in Eastern Europe and some members of the rescue is slow. These factors in the ensuing recession will have a negative impact.

Keep an open mind in the future, no way

According to the EU's own forecast, the EU economy to 2010 will have a significant recovery in economic growth may reach 1.9%. As a result of such constraints EU economic growth in the short term will not occur rapidly changes, in the medium term, the EU's economic growth in developed countries will live in the lower level still. The EU's economy lies in innovation, and with an open mind to accept the rise of developing countries.

On China, India, Brazil and other developing countries, the rise of the EU into a jealous fear of contradiction. In particular, the momentum towards the development of China, the EU also felt a kind of pressure. Such sentiments, makes the European Union in the process of economic and trade relations with China or even foreign political relations often choose the wrong policies, and these policies on the EU's economic development is often undesirable. If the European Union to adopt a more open mind towards the emerging market countries, trade and investment act more cooperation more lenient policy, the EU will benefit from income is greater than the current level. For example, relaxing some of the technical content of scientific and technological products of export and the export of military goods, the EU countries from such trade very high earnings. Another example, the EU, opening up more areas of the company's investment in developing countries, will stimulate the European market and job opportunities.

With the strengthening of the economic strength of the developing countries, China and other emerging developing countries the market has become increasingly important. 1 2009-September, the EU 27 countries for the export of major trading partners are a significant reduction in the maximum drop of up to 40%, while compared to China's exports declined by 1% only. This shows a steady growth of China's economy to the European economy more export opportunities, even in suffering financial crisis and economic recession in severe shock, China is still the stability of the market in the European Union. Strengthening and China, emerging market countries cooperation for the future development of the EU economy should have important positive effects. Even in response to global climate change and other global issues, the EU should be more consultation and cooperation with developing countries, the global governance into joint development opportunities, instead of creating some idea of the "Advanced" to restrict free trade and investment. If the EU is able to adjust policy, correctly respond to the challenges of globalization, the EU's economic development prospects in the long run or bright.

(Author of Shanghai Institute of the European Union, Vice President, Director, Centre for the European Union, the Shanghai Academy of social sciences research fellow)