Sunday, May 11, 2014

Germany and France Prepare for Another Battle Over the Euro

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Germany and France Prepare for Another Battle Over the Euro

As the European Union braces itself for more timid economic growth and high unemployment, France and Germany are preparing the ground for their next battle: the value of the euro and the role of the European Central Bank. In its spring forecast, which was released May 5, the European Commission said that growth is becoming broader-based in Europe. The headline numbers seem to confirm this statement; this year, the European Union's economy is expected to grow by 1.6 percent, and the eurozone's by 1.2 percent. But the statistics hide the deep divisions between Europe's core and its periphery.

Germany and its satellite economies (Austria, the Czech Republic, Slovakia) are expected to see modest growth and decreased unemployment over the next two years. But Mediterranean Europe (Spain, Greece, Italy and even France) is forecast to experience low growth and high unemployment. Even if Greece and Spain see minor economic growth his year, unemployment is expected to decrease only marginally, continuing to affect more than a quarter of the active population in either country. A year after the Cypriot bailout, unemployment on the island is expected to keep rising for the foreseeable future.

This explains why Europe is slowly getting ready for the debate over the future of the euro and the European Central Bank.

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