ECONOMIES AND LABOUR MARKETS

ECONOMIC GROWTH

Although the most serious risks of the economic crisis such as a complete breakdown of the eurozone have seemingly now been averted (although at the time of writing, a Greek exit remains distinctly plausible), many European states nevertheless continue to endure anaemic economic growth and seemingly chronic structural weaknesses. In November 2014, the European commission significantly downgraded its forecasts for growth in the eurozone. In its February 2015 forecast, the commission pointed to 'new developments ... that are expected to brighten in the near term the EU's economic outlook that would have otherwise deteriorated'. Predicted growth for the eurozone is now expected to rise from a sluggish 0.8 per cent in 2014 to 1.3 per cent in 2015 and 1.9 per cent in 2016. Crucially, Germany – the economic engine of the eurozone – has predicted growth of 1.5 per cent in 2015 and two per cent in 2016. This modest trend towards the return of to growth is put down to the decline in oil prices, the depreciation of the euro, the European Central Bank's (ECB) embrace of a large-scale quantitative easing programme, and the commission's own InvestEU investment plan. However, even on this more optimistic outlook, the commission still expects unemployment in the eurozone to average 10.6 per cent in 2016 and 9.3 per cent in the EU as a whole: this is considerably above the pre-crisis levels of 7.5 per cent and 7.2 per cent respectively.

Even in Germany, which has been the EU's greatest success story in terms of employment growth, the modest prospects of growth feed fears of a 'German illusion', the phrase coined by the economist Marcel Fratzscher to describe Germany's apparent economic weaknesses and underlying vulnerabilities. In short, Fratzscher argues that Germany's economic strength has been embellished by factors such as its labour market performance, with deep weaknesses in other areas of the economy, such as a comparatively low rate of domestic investment and a rapidly ageing population. On the other hand, Germany is increasingly at the centre of a cluster of countries such as Austria, the Czech Republic, Poland, Slovakia and Romania that excel in manufacturing and are where Europe's industrial jobs are increasingly located. This shift in the pattern of manufacturing and supply chains has been a factor in the challenges of declining competitiveness and social sustainability that southern Europe faces.

The overall figures for the EU and the eurozone conceal vast differences in predicted economic performance. For instance, after years of sluggish growth and a 'double-dip' recession, Ireland and the UK are predicted to enjoy robust growth in 2016: 4.6 per cent in Ireland and 2.7 per cent in the UK. Nevertheless, claims of a resurgence of success in the UK in particular should be treated cautiously.

Despite the gradual re-emergence of UK growth over the last 18 months (in part a bounce-back against the calamitous drop in output immediately after the financial crisis), and the strong growth in employment, a long-term view of economic