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EU cuts eurozone growth forecast as Italy debt soars
BRUSSELS, May 7, 2019 (BSS/AFP) – The European Commission cut its eurozone
growth forecast for 2019 on Tuesday, with overspending by populist-run Italy
again a concern.
In its quarterly forecast, the EU executive blamed the downward trend on
the slowdown in China and US protectionism that has crimped global
confidence.
The commission said growth in the 19-nation single currency bloc would hit
just 1.2 percent this year, down from the already weak 1.3 percent predicted
in February.
“The European economy is showing resilience… yet risks to the outlook
remain pronounced,” said EU vice president Valdis Dombrovskis, warning of
“further escalation of trade conflicts and weakness in emerging markets, in
particular China.”
Europe should also “stay alert to a possible no-deal Brexit,” he added,
with negotiations on the EU’s divorce with the UK stalled and no agreement in
sight.
The commission said the EU as a whole — still including Britain — would
grow by 1.4 percent instead of its earlier forecast of 1.5 percent.
The EU also warned that Italy’s public debt would balloon to a record 133.7
percent of GDP in 2019, a situation that could reopen a bitter feud between
Brussels and Rome about the populist government’s spending plans.
Italian debt would grow even further in 2020 to 135.2 percent of GDP, it
forecast, well over commitments made to Brussels and more than double the
EU’s 60 percent limit.
The alarm bell over Italy’s debt comes just as the eurozone’s third biggest
economy returned to slender growth earlier this year after a short downturn.
Last year’s technical recession had put pressure on the populist
government, which took power in June on the back of big-spending electoral
promises.
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The health of the German economy is also a worry for the EU as slumping
demand for foreign cars in China takes a toll on Europe’s export powerhouse.
But the EU believes that the German economy will rebound from a weak 0.5
percent in 2019 to 1.5 percent in 2020.
Among the other large EU economies, Poland and Spain are projected to out-
perform their neighbours, with real GDP growth rates above the EU average in
both 2019 and 2020.
Belgium, Spain, France and Italy are to commit significant public
overspending in 2019, with debt levels close to or above 100 percent of GDP,
the EU said.
BSS/AFP/SR/1935 HRS