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Austerity and economic trends

Austerity and economic trends. EPSU Economic Policy Group 29 November 2011. Latest austerity measures Greece monthly pensions of more than €1200 a month to be cut by 20% 50% increase in number of civil servants suspended on partial pay – now 30,000

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Austerity and economic trends

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  1. Austerity and economic trends • EPSU Economic Policy Group • 29 November 2011

  2. Latest austerity measures • Greece • monthly pensions of more than €1200 a month to be cut by 20% • 50% increase in number of civil servants suspended on partial pay – now 30,000 • Increase in income tax by reduction of threshold from €8000 to €5000 a year • Portugal • Abolition of Christmas and holiday bonuses for public sector workers on more than €1000 a month (cuts also for lower paid ); 20% cut in pay for those on more than €1500 • Increase in VAT, cut in public holidays, cuts to public sector pensions, recruitment freeze 2 EPSU Executive Committee 8-9 November 2011

  3. Spending cuts 2011-2014 • Based on an OECD survey (17 European countries) – next four years will see public spending cuts of at least €350 billion but this is before taking account of the more recent measures proposed in Greece, Portugal, France and Italy which should take that total well beyond €400 billion – roughly the equivalent of the total annual government expenditure in the Netherlands and Portugal combined 3 EPSU Economic Policy Group 29 November 2011

  4. Economic outlook • DG ECFIN September 2011 • Based on an update for the seven largest EU Member States, the quarterly growth profile has been revised down considerably • Weakening of consumption growth • Deterioration of business and consumer sentiment • Likely impact of financial market stress on confidence and investment cost • Expected slowdown of external demand • the drag from accelerated fiscal tightening in some member states 4 EPSU Economic Policy Group 29 November 2011c

  5. Economic outlook • DG ECFIN September 2011 • Double-dip recession, although unlikely cannot be excluded • Significant fiscal sustainability challenges are yet to be tackled not only inside the EU but also in key countries outside. The resulting fiscal consolidation efforts may weigh more on domestic demand than currently envisaged. 5 EPSU Economic Policy Group 29 November 2011

  6. Economic outlook • DG ECFIN November2011 • “turn for the worse” • “sharply deteriorating confidence and intensified financial turmoil” • “urgent fiscal consolidation is weighing on domestic demand” • “domestic demand shrivelled” in second quarter of 2011 and outlook worsened abruptly over the summer • “outlook for investment darkened rapidly” • Second half of 2012 will see “gradual and feeble return of growth” 6 EPSU Economic Policy Group 29 November 2011

  7. Economic outlook • DG ECFIN November2011 • Expected growth in 2011 1.6% EU, 1.5% Eurozone • 0.5% for both in 2012 • 2013: 1.5% EU, 1.4% Eurozone • Countries that were better performers in 2010-11 likely to see fastest deceleration in 2012 • “The present forecast heavily relies on the assumption that policy measures to combat the sovereign-debt crisis will eventually prove effective.” 7 EPSU Economic Policy Group 29 November 2011

  8. GDP change 2007-2010 8 EPSU Economic Policy Group 29 November 2011

  9. Unemployment 2008 and 2011 9 EPSU Economic Policy Group 29 November 2011

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