The lack of structural measures in large economies including France and Italy present the biggest threat to growth in the euro area, Swiss Re Ltd.’s Chief Economist Kurt Karl said.
The region’s economy will probably expand 1 percent this year after the 18-nation bloc emerged from recession in the second quarter of 2013, Karl said in an interview in Rueschlikon, Switzerland yesterday. “Growth is expected to remain slow,” he said.
Indications that the euro area’s recovery is gaining traction have mounted as economic confidence increased more than forecast in March. Yet the region remains dogged by high unemployment and anemic price growth as it struggles to expand output — jobless rates in France and Italy, the second and third-biggest economies, are more than 10 percent and political uncertainty in both countries has stymied efforts for an overhaul.
“That is the biggest issue for Europe in the long run,” Karl said. “I foresee slow growth otherwise. Italy needs to reform its labor market, while France should lower taxes.”
–With assistance from Zoe Schneeweiss in Zurich.