European Union President Herman Van Rompuy said the euro-area economy is likely to resume growth this year after slipping into a recession in 2012.
“There are increasing signs that 2013 is likely to mark the end of the recession in the euro area, but unemployment levels across the union are unacceptably high,” Van Rompuy said today in the text of a speech in Dublin. “As growth returns, it also takes time before perceptible effects on employment start kicking in.”
Economic confidence in the euro area rose to a five-month high in December, the European Commission in said yesterday, and the euro has gained 2.7 percent against the dollar in the past two months on signs European leaders are tackling the sovereign-debt crisis. Still, the unemployment rate is at a record 11.8 percent and the euro-area economy is estimated to have contracted for a third straight quarter in the October-December period, according to a Bloomberg survey of economists.
Last year “marked a turning point in the crisis: the euro zone is no longer in ‘existential threat’ mode,” Van Rompuy said. “The gloomiest of expectations are slowly fading, and the integrity of our monetary union is no longer called into question, whether by the media or the markets.”
Van Rompuy said European leaders “have made clear their commitment to step in when necessary, to help countries under market pressure withstand short-term shocks while they carry out much-needed reforms.” He pointed to “steadily decreasing” budget deficits and borrowing costs “going down substantially in almost all euro-area countries” as positive indications.
Still, the European Central Bank last month lowered its growth forecast for the euro area and now predicts a contraction of 0.3 percent in 2013. Data yesterday showed that 18.8 million people were unemployed in the currency bloc in November, up 113,000 from the previous month.
“The situation is dramatic and there can be no more important priority,” Van Rompuy said. “We have to be fully aware that the economy is reacting with a time-lag: once stability starts coming back, it takes time before this is translated into more investment and growth.”