EU forecasts British economic slowdown during Brexit talks
The European Union expects Britain's economy to slow down as the country negotiates its exit over the next couple of years, but forecasts an improvement for the bloc as a whole despite a range of uncertainties.
In its Winter Economic Forecast released Monday, the 28-nation EU said it predicts British economic growth will slump to 1.5 per cent this year and 1.2 per cent in 2018, from a recent high of 3.1 per cent registered in 2014.
The wider EU, on the other hand, is expected to improve steadily, with growth picking up from 1.6 per cent in 2014 to 1.8 per cent this year and next.
"The European economy has proven resilient to the numerous shocks it has experienced over the past year," said EU financial affairs chief Pierre Moscovici. "Growth is holding up and unemployment and deficits are heading lower."
For Britain, though, the report said that "economic growth is projected to moderate in 2017 and weaken further in 2018," largely coinciding with the period during which the country is to negotiate its divorce terms with the 27 other EU nations. It acknowledged that, for this year, the impact of the leave vote was expected to be less severe than originally thought, but it kept its 2018 decline intact.
Based on better-than-expected figures for Greece, Moscovici said he had good hopes that the debt-ridden country and its creditors would find a way next week to stave off another crisis. The sides disagree on whether more austerity reforms should be planned and how to ease Greece's debt load.
An agreement is needed before Greece can get more bailout loans, which it needs before July.
Moscovici said he would be flying to Athens on Wednesday to help iron out the differences ahead of a meeting of Eurozone finance ministers in Brussels next Monday.
The EU and the International Monetary Fund(IMF) disagree on the country's financial situation, with the Washington-based fund taking a darker view and saying its debts are unsustainable.
Moscovici insisted it was time to stand by Greece. "We cannot add, just like that, a crisis to a context of recovery in Greece and global uncertainty. Let's be reasonable."
Fears are also growing that, with US President Donald Trump in office, help from the IMF for Greece could become more difficult. The United States is the IMF's biggest donor and Trump has expressed doubts about Greece's future in the euro.
Ratings agency Fitch said that its rating of Greek debt, which is already at junk level, depends on the country getting a deal with its creditors on the new reforms. However, it said it expected a deal because the European creditors do not want another Greek crisis just as they face uncertainty from a raft of general elections, including in France, Germany and the Netherlands.
"With uncertainty at such high levels, it's more important than ever that we use all policy tools to support growth," said Moscovici.