OECD Economic Surveys European Union

1 OECD Economic Surveys European Union June 2018. OVERVIEW. This Overview is extracted from the Economic Survey of the European Union . The Survey is published on the responsibility of the Economic and Development Review Committee (EDRC) of the OECD, which is charged with the examination of the Economic situation of member countries. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. OECD Economic Surveys : European Union OECD 2018.

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3 Executive summary The economy is expanding supported by accommodative macroeconomic policies Policies to pursue stronger growth and make it more inclusive are needed OECD Economic Surveys European Union 2018 OECD 2018. 2 EXECUTIVE SUMMARY. Economic conditions keep improving . Bringing everyone on board to revive the The EU economy is finally growing robustly. European project. Income inequality in EU. After years of crisis, the European economy has countries is on average lower than in other robustly expanded in 2017 (Figure A), helped by OECD countries.

4 At the same time, the crises very accommodative monetary policy, mildly have left a legacy of social problems and expansionary fiscal policy and a recovering discontent. Unemployment remains above pre- global economy. GDP growth is projected to crisis levels in many countries and real wages remain strong in 2018 and 2019 by the standards fell sharply in some countries hard hit by the of recent years. crisis and stagnated or barely grew in others. Figure A. The economy has recovered strongly Youth unemployment, at about 16% on Y-o-y % changes % of the labour force average, remains high and there are still too 4 12 many youth left behind.

5 Projections 2 10. Improving long-term growth is key to make 0 8 growth more inclusive -2 Real GDP growth 6. Unemployment rate (rhs). Potential growth has fallen substantially -4 4. since the financial crisis (Figure C). Sustained -6 2 improvements in living standards are held back 2006 2008 2010 2012 2014 2016 2018. Source: OECD (2018), OECD Economic Outlook: by weak productivity and investment in many Statistics and Projections (database). countries. The EU can lift the EU's low growth StatLink2 potential by creating the right incentives and conditions to support national reforms.

6 Across but important challenges remain Europe there is ample scope for reforms to boost competition, encourage innovation and With an expansion underway, attention needs business dynamism and make growth more to shift to Europe's long-term challenges. inclusive. It is in good times that countries can Wellbeing disparities, the UK vote to exit the best afford the adjustment costs of such EU, low potential growth, an ageing population reforms. and continuous technological developments are Figure C. The EU's potential output growth is all important challenges.

7 To further strengthen low the confidence of all its citizens (Figure B), the As a percentage of potential GDP. European Union needs to focus on policies that support a stronger and more inclusive growth. European Union United States Figure B. Citizens' trust in the EU is recovering % of population claiming they tend to trust the EU, as an institution % 70 60 50 2000 2002 2004 2006 2008 2010 2012 2014 2016. 40. 30. Source: OECD (2018), OECD Economic Outlook: 20. Statistics and Projections (database). 10. StatLink2 0. 2004 2006 2008 2010 2012 2014 2016 Deepening the Single Market is a key EU.

8 Source: European Commission, Public Opinion in the lever to enhance prosperity. A dynamic and European Union , Standard Eurobarometer Survey. large single market, that stimulates competition StatLink2 and efficiency, is the EU's main asset for spurring productivity, investment and Economic growth. However, the single market remains OECD Economic Surveys European Union 2018 OECD 2018. EXECUTIVE SUMMARY 3. fragmented, with barriers in key areas, Creating inclusive labour markets to raise including services, transport, finance, energy living standards and potential growth.

9 With and digital markets. Removing unnecessary the recovery maturing, some central European barriers to competition and cutting red tape can countries are already facing labour shortages. help to improve Economic dynamism, Now is the time to build on national reforms to facilitating firm entry and exit, reallocation of ensure that women, youth, older workers and resources across firms and technological migrants are integrated in the labour market. diffusion. New efforts to complete the single Making it much easier to hire skilled workers market by creating new business opportunities from outside the EU, by simplifying the would also stimulate business investment, eligibility requirements and procedures for the which is increasing but remains below pre- EU Blue Card, would also help.

10 Swiftly crisis. integrating refugees would improve both their Better harnessing digital technologies to wellbeing and expand the labour force and help adapt to rapid technological change. An address EU citizens' concerns. Labour mobility important factor for future growth will be the between EU countries has increased in recent ability of EU economies to reap the benefits of years but still remains relatively low. To a large digitalisation. Several countries lag behind in extent, this reflects Europe's linguistic and the quality of digital infrastructure: use of cultural diversity, which is an asset.