Pierre Moscovici: Avoid any more economic ‘bubbles’

Ireland must avoid the prospect of any more “bubbles’” developing in its economy in the future, Economic and Financial Affairs Commissioner Pierre Moscovici has cautioned.
Pierre Moscovici: Avoid any more economic ‘bubbles’

His economic forecast for this year lists Ireland as having the fastest GDP growth in the EU, at 4.5%, which the commissioner described as “brilliant”.

But the risks to the EU’s moderate recovery and growth are increasing, led by slower growth in emerging markets including the disorderly adjustment in China, interest rate rises in the US, and a further fall in oil prices.

Growth in the eurozone is projected to increase to 1.7% this year from 1.6% last year, and climb to 1.9% in 2017.

For Ireland, employment is expected to grow by 1% and unemployment is expected to fall to 7.8% in 2017.

The commission predicts growth will slow to 3.5% next year, a rate which it describes as being “more sustainable”. This is down from 6.9% growth last year.

Asked if he thought the current growth rate was not sustainable, Commissioner Moscovici said the country’s very strong performance had to be respected.

“The result …[is one] that other countries in the EU would envy …because it is much above the world growth expected by all financial institutions in 2016, so it’s in a very strong position.

“But let’s be clear, we must avoid figures that could lead to the fear that some bubbles would be recreated,” he said, adding that it was clear to everybody that that must be avoided.

“The figure of 4.5% is as well brilliant and balanced,” he said.

The growth forecast of 3.5% next year is third-highest in the EU after Luxembourg and Romania, and is on a par with Poland.

The EU average this year is forecast at 1.9%, with growth picking up slightly to 2% next year.

While the Government is forecasting a balanced budget next year, the commission is more cautious, expecting that it will be -0.8% of GDP.

Luxembourg, Cyprus, and Estonia are expected to record surpluse, with Germany breaking even.

In its forecast, the commission has factored in supplementary budgets for spending on health and possible social protection, as there has been over the past few years.

However, it warned the country is particularly exposed to external risks, including interest rate shocks. Domestic demand could be strengthened, however, by housing construction.

The commission did not repeat its warning to use more revenue to cut the gross debt load — set to drop to 91.5% next year — but did warn of high investment figures.

A doubling of intellectual property, with the transfer of patents to Ireland last year and also in services imports, will result in more profits being booked in Ireland.

Greece remains a concern. The Commissioner said he was “confident” there would be no relapse in Greece.

The country will remain in recession this year, and its economy is expected to grow in 2017. That “tells us that the Greek economy is capable of rebounding”, he said.

Meanwhile, the European Trade Union Confederation criticised the commissioner for saying nothing about what it said are much-needed wage increases, or the increase in the number of low-paid and insecure jobs.

“Moderate growth is obviously better than no growth, but it is deeply disappointing and worrying that unemployment is expected to fall only at snail’s pace,” said Veronica Nilsson of the ETUC.

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