EUROPE’S ECONOMIC RESILIENCE UNDER INFLATIONARY AND FISCAL PRESSURE

BusinessEurope has published its latest Economic Outlook, highlighting the European economy’s resilience while warning of growing risks from inflation, high energy costs and interest rates. Commenting on the Economic Outlook’s findings, BusinessEurope Director General Markus J. Beyrer said:

“Despite significant external challenges over the past six months, Europe’s economy has proved more resilient than expected – with growth forecast to remain at 1.4% in the EU and 1.2% in the euro area in 2027. However, several worrying trends threaten this resilience and could hamper future growth.

Inflation is a clear concern. Annual inflation rose to 3.8% in September in both the EU and the euro area, while energy inflation reached 18.9%. The vast majority (97%) of our surveyed members said they were concerned about inflationary dynamics. This prolonged energy shock is adding to the pressure on businesses, with higher gas prices expected to reach consumer bills faster than in 2022. In many EU Member States, rising debt, higher interest costs and delayed consolidation are increasing vulnerabilities and putting further pressure on EU sovereign bond markets.

These risks must be tackled urgently, beginning with short-term measures to bring down energy prices. National relief measures should remain temporary and targeted, without fragmenting the Single Market. Member States should reduce taxes, levies and network tariffs, which account for around one third of the industrial electricity bill.

Credible medium-term fiscal plans are essential to address mounting national fiscal challenges. Accelerating the Savings and Investments Union, alongside national efforts to develop capital markets, would broaden the investor base for European public and private debt and help financing conditions withstand shocks. These steps would support the investment Europe needs to compete globally.”

To read the Outlook in full, click here.