EU news monthly: Germany intends to borrow about 100 billion euros
Politics
Slovenia has taken over the EU Presidency after Portugal. The Portuguese Presidency, which ended on the last day of June, was marked by an effort to steer the EU on the path out of the covid-19 pandemic. Slovenia will strive to facilitate the EU‘s recovery and reinforce its resilience, reflect on the future of Europe, strengthen the rule of law and European values, and increase security and stability in the European neighbourhood.
The United States and the EU have agreed to end the protracted dispute over subsidisation of aircraft manufacturers which has caused them to impose tariffs on each other. Since 2004, the EU and the US have accused each other at the World Trade Organisation of illegally supporting their aircraft manufacturers Airbus and Boeing. In these disputes, the WTO has ruled that both parties have given financial support to their producers, contrary to international rules.
The EU Member States have formally approved the so-called climate law, which sets binding rules for achieving common EU emissions targets. A key norm in the EU‘s environmental strategy sets out how the Union should achieve climate neutrality by 2050. Thus, not producing any greenhouse gas emissions or balancing them by planting new trees for example, is necessary.
The EU will extend the sanctions list against Belarus. The sanctions will now affect 78 people and seven firms that are actively intervening against representatives of the Belarusian opposition. The EU continues to view last year‘s presidential election in Belarus, which authoritarian leader Alexander Lukashenko again won, as rigged.
Germany intends to borrow about 100 billion euros next year. Originally, the German government wanted to borrow 81.5 billion euros. Some of the reasons for this increase are the costs of health care and climate protection.
Economy
In the first quarter of 2021, seasonally adjusted GDP decreased by 0.1% in the EU compared with the previous quarter. This decline follows a fall in the fourth quarter of 2020 (-0.4% in the EU) after a strong rebound in the third quarter of 2020 (+11.7% in the EU). Before, the sharpest decreases since the time series started in 1995 were observed in the second quarter of 2020 (-11.1% in the EU).
The EU unemployment rate was 7.3% in May 2021, down from 7.4% in April 2021 and up from 6.9% in May 2020. Eurostat estimates that 15.278 million men and women in the EU were unemployed in May 2021.
EU annual inflation was 2.3% in May 2021, up from 2.0% in April. A year earlier, the rate was 0.6%. The lowest annual rates were registered in Greece (-1.2%), and Malta (0.2%). The highest annual rates were recorded in Hungary (5.3%) and Poland (4.6%). Compared with April, annual inflation fell in 4 Member States, remained stable in one and rose in 22.
In the first quarter of 2021, the hourly labour costs rose by 1.7% in the EU, compared with the same quarter of the previous year. In the fourth quarter of 2020, hourly labour costs increased by 3.2%. In the EU, the costs of hourly wages & salaries increased by 2.6% and the non-wage component decreased by 1.0% in the first quarter of 2021.
Author
Erste Bank Research Team
Erste Bank
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