Ireland is poised to become the fastest-growing EU economy in 2014, and is predicted to reach 4.6 percent growth, just a year after its exit from the Troika bailout plan.
“Even though the medicine was very bad tasting, very hard for ordinary citizens . . . now Ireland is coming back,” the Commission Vice President Jyrki Katainen said Tuesday after the European Commission published the revised outlook.
The medicine Katainen referred to was the tough austerity measures Ireland agreed to when it accepted a $92 billion (€85 billion) bailout from the IMF, European Central Bank, and European Commission in 2010 after the state assumed the debts of Irish banks.
Four other Eurozone countries - Greece, Portugal, Spain, and Cyprus, also sought financial help from the ‘Troika’ of lenders during the euro crisis.
Brussels bumped up its growth estimates for Ireland to the fastest in the 28-member EU, and cut growth in Cyprus, the most recent country to seek a bailout, down to -2.8 percent in 2014.
“Ireland, by doing what was necessary to do, has regained confidence back, which means that private investors can trust in the country’s future . . . which means more jobs for the ordinary citizens,” Katainen, the former prime minister of Finland, said.
In 2015, Brussels believes Dublin will continue its winning streak and grow by 3.6 percent, up from the 3 percent prediction it made six months ago.
Ireland was the first country to exit its bailout program, which lasted three years and ended on December 15, 2013. However, freeing itself from IMF debt wasn’t easy; the government had to slash its national budget by €30 billion, and cut salaries by up to 20 percent.
Overall EU growth forecast slashed
The rest of the forecast for the eurozone remains rather gloomy, as the European Commission slashed its 2014 forecast to 1.3 percent growth in the whole of the EU, and 0.8 percent in the 18-member euro currency bloc.
Economic risks to the EU come from the fragility in financial markets, the risk of incomplete reforms, as well as geopolitical tension, the autumn report said.
Many geopolitical factors are weighing heavily on the European economy, from the crisis in Ukraine, to Russian sanctions, as well as internal factors like deflation, unemployment, and high debt.
“Business is very uncertain as to what the future will bring, and they [the EU, Ed.] are just not investing and expanding,” Jack Rasmus, economics professor at St. Mary's College in California, told RT.
The report also decreased economic expectations for next year. The 2015 growth forecast was trimmed to 1.1 percent, down from 1.7 percent just 6 months ago. Some of the biggest engines of growth, like Germany and France, also received a growth downgrade. France, which in May was forecast to expand 1.5 percent in 2014, will only grow 0.7 percent, and Germany’s 2015 GDP growth was lowered to 1.1 percent from 2 percent.
READ MORE: Powerhouse Germany gets own spoonful of austerity
On a more positive note, the commission expects positive growth throughout the EU in 2015 and 2016.
The European Central Bank has so far opted out of US-style quantitative easing stimulus, but the worsening situation across the continent has forced them to consider the option. The 24-member governing council will meet in Frankfurt at 1:45pm local time on Thursday to make a decision on the zone's interest rates.