Increased protectionism overshadows Eurozone growth

The economy of the entire Eurozone is growing, but at a slower pace under the background of increased global protectionism, German expert and European think tanks reported.

In recent years, some advanced industrial countries have increased their protectionist measures. The main reason for this development is the structural change in the industrial nations, said Thiess Petersen, a senior economics expert at the Bertelsmann Foundation in Germany.

However, protection is bad for all economies involved. No global player should have any interest in protectionism, since economic prosperity and growth prospects could only be guaranteed through cooperation and communication.

BIGGEST THREAT

Petersen told Xinhua in a recent exclusive interview that the grow of Eurozone economy can be seen in the unemployment figures. The unemployment rate in the eurozone has fallen from 12 percent in 2013 to 8 percent in October 2018.

Meanwhile the rate of economic growth has weakened in recent months. In the first three quarters of 2018, the economy of the entire euro area grew by 0.4 percent, 0.3 percent and 0.2 percent.

For the next years, economic growth is supposed to be slightly lower than in recent years. Between 2015 and 2018, the growth rate was around 2 percent per year. Over the next 4 years, the International Monetary Fund expects the growth rate to decline steadily to 1.5 percent in 2022, Petersen said.

"For the economy as a whole, protectionism has a negative impact on gross domestic product and employment," he reiterated.

The expert pointed out that both economic theory and economic history are very clear: the income and employment gains of the protected sectors are not sufficient to compensate for the economic damage to the economy as a whole.

A joint forecast report by the Munich-based Ifo institute, the Swiss KOF institute, and Italy's Istat institute supported Petersen's point of view.

According to the report, euro area's economy is expected to continue to grow this year, but at a slower pace than in 2017. "The economic outlook is currently dominated by downside risks. Political tensions in the euro area and the rise of protectionism may undermine the upwards trend in the future."

The president of the European Central Bank (ECB) Mario Draghi also warned at the European Parliament that protectionism as a risk for the Eurozone.

Draghi identified "the threat of protectionism, vulnerabilities in emerging markets and financial market volatility" among the main risks surrounding the euro area.

"The biggest risk to this rosy outlook is protectionism, which must not become the new normal: that would only hurt those of our citizens we most need to protect," said Pierre Moscovici, European Commissioner for Economic and Financial Affairs, Taxation and Customs.

According to the commission, the Eurozone growth was still set to remain strong, but warned an escalation of trade protectionism poses threat to global economic growth.

PRACTICAL COOPERATION

In face of the growing protectionism tendency, Chinese and European officials pledged for open global markets, multilateralism and cooperation.

Korbinian Wagner, spokesman of German Federal Ministry for Economic Affairs and Energy, told reporters in a recent written interview that world trade has become under pressure due to increasing protectionist tendencies. Protectionism harms all concerned parties and will have a negative impact on the world economy.

"Uncertainty is a poison for the economy," Wagner said.

The Federal Government is strongly committed to open global markets and against protectionism, as well as to strengthening the World Trade Organization (WTO) as the center of the multilateral trading system. Companies must be able to compete for fair market and competitive conditions on world markets, he noted.

From Petersen's opinion, advanced industrial countries should not use protectionist measures. The people and regions that suffer income losses as a result of globalization and structural change should be supported differently.

Meanwhile, if trade disputes cannot be reduced, Europe should promote the economic integration of the European Union, according to him.

"Hence, a strong safety net is the best tool to foster the support for international trade and to reduce the desire for protectionism," Petersen said.

Europe and Asia should strengthen ties to enhance cooperation and communication and defend prosperity and growth prospects from protectionism, both Chinese and European officials said earlier this month at Boao Forum for Asia (BFA) Rome Conference in Italian capital of Rome.

BFA Vice Chairman Zhou Xiaochuan called for global joint efforts to uphold multilateralism and push forward the reform of the WTO in the face of rising deglobalization sentiments marked by populism and protectionism.

Romano Prodi, former Italian prime minister and former president of the European Commission, highlighted during the conference the importance of economic globalization to global growth.

The Belt and Road Initiative is in line with the common goal of development, Prodi said, adding that Europe should conduct closer practical cooperation with China and Asia.