Thank you and good morning everyone,
As Paschal just said, we are happy to have this chance to meet in person and for this we are thanking the Portuguese Presidency for hosting all of us in an excellent way. And this is due to the progress that was made in the vaccination campaigns and also the improving health situation here in Portugal, which is of course great news.
There was a certain optimism in our meeting, and pride even, for decisions taken in the last year and indeed, as vaccinations accelerate restrictive measures are easing and economic activity is gathering pace.
So after the technical recession that we had in the last quarter of 2020 and in the first quarter of this year, we are seeing very encouraging data and we expect a rebound in the second half of this year.
To recall, our Spring Forecast that I presented one week ago more or less, projects an expansion of 4.3% this year and 4.4% next year in the euro area. And the euro area GDP is expected to go back to its 2019 level in the first part of next year.
Of course this economic situation will remain a divergent one among sectors, among citizens and among Member States. I was referring to a certain pride of initiatives taken. Among these, let me stress the importance of the instrument that was decided to support short-time work schemes, the SURE mechanism. This mechanism has covered around 20% of EU employment and around 30 million workers have been supported by the SURE mechanism in 19 countries.
Of course the employment situation is a challenge and slack will remain in the labour market for some time.
This news is very encouraging. At the same time we had a discussion based on a note prepared by ECFIN also on the scarring aspect, so the risk of permanent damages we are facing, and we identified three main risks:
-The capital channel - due to the contraction of business investment during the pandemic and we experienced this with the previous crisis;
-The labour channel - and especially the disruption to young people's education and training, that disproportionately affected people with disadvantaged backgrounds;
-And the technology channel - through cutbacks in investment in intangible assets, R&D, despite the enormous investments for our digital and green transitions.
We must therefore be very careful not to pull back support for our workers and companies too quickly. This essential support, both automatic and discretionary, led to an increase in the aggregate euro area deficit to 7.2% last year and the projected 8% deficit this year with the level of debt reaching in 2021 102%. As we've underlined before, it will be essential to manage very carefully the transition to more targeted support measures. The Commission will provide its fiscal guidance for 2022 at the beginning of June, with this very much in mind, and with in mind the cooperation with Paschal and the Eurogroup to assess the recommendations for the euro area as a whole.
Final point, of course, we cannot be satisfied with simply returning to the end-2019 GDP level. It is not only a rebound we are looking for. We are looking for strong, stable and sustainable growth. This is the real scope of the Recovery and Resilience Facility. You know that we received 18 plans and the Commission is trying to work as fast as possible and I use also this opportunity to invite the 5 Member States that have not yet ratified the Own Resources Decision to do it as soon as possible so as to make possible what we are aiming for, to have the first disbursements before the summer break.