EU says protectionism poses threat to economic growth

BRUSSELS - The European Commission said on Thursday that the eurozone growth was still set to remain strong, but warned an escalation of trade protectionism poses threat to global economic growth.

According to the Spring 2018 Economic Forecast, the growth rates for the European Union (EU) and the euro area beat expectations in 2017 to reach a ten-year high at 2.4 percent.

Growth in both the EU and the eurozone is set to remain strong in 2018 and ease only slightly in 2019, with growth of 2.3 percent and 2.0 percent respectively.

"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, Commissioner for Economic and Financial Affairs, Taxation and Customs.

The combination of pro-cyclical fiscal stance in the US and inward-looking trade policies represent "a dangerous nexus in our view," Moscovici added.

The fiscal stimulus would boost short-term growth, but also raises the risk of the US economy overheating and interest rates being raised faster than initially assumed, the commission said in a statement.

An escalation of trade protectionism presents an unambiguously negative risk to the global economic outlook, it added.

"The materialisation of these risks could throw the expansion off track in a European economy that has recently been more reliant on investment and exports," Marco Buti, the head of the directorate-general of Economic and Financial Affairs, wrote in the preface to the forecast.