Economic growth will continue to pick up in 2014 as the euro area gradually recovers, the mutual fund industry attracts more inflows and the pace of fiscal consolidation lessens. In 2015, the new EU VAT regime for e-commerce will bear on competitiveness, and higher domesticVAT rates slow demand. The backward-looking wage indexation could transmit the effects of the VAT rise into wages, reducing competitiveness.
Some further fiscal consolidation is still needed, but the automatic stabilisers should be allowed to work. Aligning financial regulations with EU and international initiatives is necessary to contain risks in the large financial sector. Structural reforms to enhance work incentives would reduce structural unemployment. Reducing barriers to competition and improving the education system would enhance the growth potential.
Note: All data definitions based on internationally comparable standards and may differ in specific cases from common national definitions.