European Union News - Economic & Financial Affairs

On 12 February 2008, the Council examined the updated stability programme of the Netherlands, which covers the period 2007 to 2010. Since 2006, Dutch GDP growth again significantly outpaces potential growth. The current upturn is generally assessed to be a regular cyclical upturn and is not widely mistaken for higher potential growth, as was the case during the rather long boom period at the end of the 1990s. Furthermore, it is more broadly based on both domestic and external sources of growth. However, given the good starting position, the tightness of the labour market may exert upward pressures on wages and prices rather early.

On 12 February 2008, the Council examined the updated stability programme of Germany, which covers the period 2007 to 2011. Economic growth in Germany was significantly stronger in 2006 and 2007 compared with the first half of the decade. Sustained wage restraint as well as structural reforms helped to regain competitiveness and stimulate employment growth. The marked improvement on the labour market supports the projection of a steady recovery of domestic demand, helping to balance an expected lower growth contribution from net external demand.

On 12 February 2008, the Council examined the updated convergence programme of Sweden, which covers the period 2007 to 2010. The Swedish economy has performed well in recent years. In 2007, the economy has entered into a more mature phase that is reflected by a solid domestic demand boosted by buoyant investment and private consumption growth. Against this background, Swedish public finances have also been strong with consistent and sizable general government surpluses.

On 12 February 2008, the Council examined the updated convergence programme of Hungary, which covers the period 2007 to 2011. Over the last several years, Hungary has fallen behind in the catching-up process compared to its neighbours. This has been coupled with increasing fiscal laxity, which contributed to considerable internal and external imbalances and relatively tight monetary policy. Since mid-2006, the Government has taken comprehensive measures to consolidate public finances. These have set the budget deficit on a decreasing trend from a peak of over 9 % of GDP in 2006 to around 6 % (and possibly below, according to the most recent estimates) in 2007 and have started to lead to an improvement of the external balance. At the same time, the indirect tax increases and hikes in regulated prices have temporarily put upward pressure on inflation, which should decelerate again from 2008.

On 12 February 2008, the Council examined the updated convergence programme of the United Kingdom, which covers the period from financial year 2007/2008 to financial year 2012/2013. The United Kingdom economy has displayed robust and remarkably stable growth over the last ten years and in 2007 grew at a rate above potential, though with building imbalances including low household saving and a wider external deficit. Favourable growth conditions have, however, been accompanied by a deterioration in the general government deficit in the current financial year, 2007/2008. After a general government deficit in 2006/2007 of 2,6 % of GDP, the deficit is  envisaged in the programme to reach around 3 % of GDP in 2007/2008, with no margin to the reference value.

On 12 February 2008, the Council examined the updated stability programme of France which covers the period 2007 to 2012, one year more than the required reference period to coincide with the government programme. Between 2001 and 2005, annual real GDP grew by just above 1,5 % on average. This was in line with average growth in the euro area, while inflation was marginally below the euro average. Since 2006, GDP growth in France has fallen below the euro area average, with evidence of structural problems and a related deterioration in competitiveness. Although the unemployment rate has improved since 2005, it remains well above the euro area average, and the employment rate and the hours worked are still low.

On 12 February 2008, the Council examined the updated convergence programme of Romania, which covers the period 2007 to 2010. Romania has experienced strong economic growth averaging 6,5 % annually between 2003 and 2006. However, the strongly performing economy is showing clear signs of overheating with a high and growing external account deficit (projected at close to 13 % of GDP in 2007) with a smaller coverage of FDI financing-despite sustained non-privatization related investment in 2007 — but still mitigated by a larger share of medium and long term capital inflows based on so far available 2007 data.

On 12 February 2008, the Council examined the updated stability programme of Luxembourg, which covers the period 2007 to 2010. Since the end of the 2001-2003 slowdown, Luxembourg is experiencing a new period of strong growth. On average, real GDP grew by 5,25 % and domestic employment by over 3 % a year in 2004-2007. In this context, Luxembourg has been able to bring its public finances back to surplus. Growth should remain strong during the period covered, even if it is forecast to slow down slightly in the coming years. However, despite the currently good condition of the economy and especially of public finances, the problem of population ageing will be particularly severe in Luxembourg and long-term sustainability is therefore a serious challenge.

In order to finance and stimulate innovation of small and medium-sized enterprises (SMEs), the European Commission has proposed measures to boost cross-border investments of venture capital funds. Up to now venture capital funds, which are vitally important for the financing of growing innovative small companies, face too many problems to overcome different national regulations for cross-border fund raising and investment. For this reason they often don't reach the necessary critical mass.  Venture capital is being increasingly important for environmental sustainability (€1.25 billion was raised in 2006). Sustainable venture capital funds invest in the range of €1-5 million with focus on early-stage and typical investments in renewable energies and clean technologies.

The European Commission has published a study by independent consultants on the EU markets for legal services associated with house and land sales (conveyancing services). The study finds that consumers have greater choice and are on average paying less for conveyancing services under deregulated systems, with no loss in quality. The market for conveyancing services is worth about €17 billion per annum; efficiency savings of even a few percent following deregulation would therefore save consumers millions of euros each year. The Commission is calling on Member States to look at the findings and to review and update national laws which limit competition and the free circulation of services throughout the Single Market instead of serving the interests of consumers.

The European Commission has approved under the EU Merger Regulation the proposed acquisition of the Dutch-based company Packard Bell by Taiwan-based personal computers manufacturer Acer. The Commission concluded that the transaction would not significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it.