EU warns protectionism ‘biggest risk’ to eurozone growth

“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,” EU Economic Affairs Commissioner Pierre Moscovici said in a statement.

The commission, the EU’s executive arm, said the 19-country single currency bloc would expand by 2.3 percent in 2018, and by 2.0 percent in 2019, the same forecast as in February.

The forecast landed a day after official data said growth in the eurozone slowed in the first quarter this year fueling fears that the recovery in Europe was losing steam after a strong 2017.

The EU also said Thursday that inflation in the eurozone fell to 1.2 percent in April, a dip from 1.3 percent in March.

That edges inflation further away from the European Central Bank’s (ECB) target of near 2.0 percent.

Sparking worry about the economy is an ongoing trade dispute with the US Trump administration, which has threatened to impose tariffs of 25 percent on steel and 10 percent on aluminium on EU imports.

EU and eurozone quarterly growth in 2017-18

The Europeans and other allies have so far won a US exemption to June 1, but have prepared a long list of countermeasures in case President Donald Trump delivers on his threat.

“An escalation of trade protectionism presents an unambiguously negative risk to the global economic outlook,” the commission said in a statement.

These risks are interrelated. Due to its openness, the euro area would be particularly vulnerable to their materialisation.

In its winter forecast, the commission also delivered welcome news to pro-reform French President Emmanuel Macron, with France officially in position to emerge from the deficit procedure after nearly a decade.

The EU said that after 2.6 percent in 2017, the French deficit will reach 2.3 precent in 2018, then 2.8 percent in 2019.

The EU first opened its case against France in 2009 and its deficit has been almost consistently above the EU limit of 3.0 percent of GDP since that date.