Report by the WTO Secretariat

Real GDP growth in the European Communities (EC) was 3% on an annual average during 2006-07, but fell to an estimated 1% in 2008 partly due to the global financial crisis (and subsequently economic slowdown) that emerged in the second half of the year. While the moderation in growth was broad-based, performance at Member States level remained dispersed. Following an increase in government revenues and a decrease in expenditure related to, inter alia, the pension system reforms in several Member States, the EC fiscal deficit, as percentage of GDP, declined from 1.4% in 2006 to 0.9% in 2007 (its best fiscal performance in many years), but is estimated at 2% in 2008. Further efforts to address concerns about long-term fiscal sustainability would appear to remain needed, particularly in the light of the large costs of the measures envisaged to respond to the global economic downturn.