March 2018 EUROPEAN GROWTH OUTLOOK
European economy flying high Cyclical peak in 2018 with a good two percent growth
The BDI expects the EU economy to grow by 2.3 percent this year. Last year, GDP increased by 2.4 percent. Europe has thus reached the peak of its economic cycle.
Capacity utilisation at 84 percent is reaching its limits and is just below the record level of 85 percent in 2007. Industrial production has expanded vigorously, and is three percent higher than one year ago. This is the same pace of growth seen in the interim high of 2011 but still below the pre-crisis level.
First bottlenecks on the labour market are curbing further economic momentum. The sustained period of high unemployment has led to an increase in structural unemployment and there are no indications of a wageprice spiral on EU level.
Training and active labour market policies must become a top priority of European economic policy. This will prolong the upturn and bring wageprice trends back to normal.
The federal government must now press ahead with reforms in Europe and Germany instead of pursuing a pro-cyclical spending policy. Tax breaks are not necessary in times of economic upturn – what Germany needs instead is investment in its long-term growth potential.