European Economy to Benefit from Lower Oil Prices and Weak Euro, Says EC Vice President

Strategic Insights -

European economy is set to boost from lower oil prices and a weaker euro, according to Valdis Dombrovskis, European Commission's vice president. In an interview at the International Monetary Fund's (IMF) annual meeting, Dombrovskis noted that the slowdown in emerging markets poses some risk to the EU, but highlighted strong tailwinds, including lower oil prices and a falling euro. The vice president emphasized that the European Central Bank's (ECB) quantitative easing program has been helpful, but also stressed the need for structural reforms to strengthen the competitiveness of the EU's economy.

Key Takeaways:

  • The European Union's (EU) economy is expected to grow by 1.8 percent this year and 2.1 percent next year, according to the European Commission's economic forecasts.
  • Lower oil prices and a weaker euro are likely to be positive factors for the European economy, with Brent Crude on track for a near-11 percent gain this week.
  • The ECB's quantitative easing program has been helpful, but not a solution to structural problems in the economy.
  • Structural reforms, including implementing a European deposit insurance scheme, are necessary to strengthen the resilience of the EU's financial system.
  • Germany's trade data shows a significant drop in exports in August, with seasonally-adjusted exports falling 5.2 percent on-month to 97.7 billion euros.

Statistics:

  • Brent Crude price is on track for a near-11 percent gain this week, the biggest weekly rise since early 2009.
  • The euro was 1.1285 against the dollar on Friday, having slid from 1.2097 at the end of 2014.
  • The European Commission's economic forecasts expect the EU's economy to grow by 1.8 percent this year and 2.1 percent next year.
  • Seasonally-adjusted exports in Germany dropped 5.2 percent on-month to 97.7 billion euros in August.
  • The ECB's quantitative easing program has a monthly buy rate of 60 billion euros and a planned total of 1.1 trillion euros.

Sources:

  • CNBC
  • International Monetary Fund's (IMF) annual meeting in Lima, Peru
  • European Commission's economic forecasts
  • European Central Bank (ECB) news conference on September 3
  • Global Data Point
  • SyndiGate Media Inc. ( Syndigate.info )