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PM Lee lauds eurozone growth forecasts

But he says there are "immediate fires" to deal with such as the situation in Greece
Saturday, February 7, 2015 - 05:50
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SPANISH DELIGHT: PM Lee trying some traditional desserts, accompanied by Alfonso Vegara, honorary consul-general of Singapore in Madrid, during a tour of the city's old quarter.

Madrid

PRIME Minister Lee Hsien Loong thinks the improved growth forecasts for the eurozone for the next two years is a sign of the confidence in the state of the currency area's economic health.

The European Commission (EC), the executive arm of the European Union (EU), said in its winter economic forecast on Thursday that the eurozone should grow 1.3 per cent this year and 1.9 per cent in 2016.

This is a marked improvement from the commission's estimates last November when it projected growth of 1.1 per cent this year and 1.7 per cent the next.

But the good news should not deter from the fact that there are still many pressing worries to address, said Mr Lee in an interview in Madrid on Friday, the second and final day of his first official visit to Spain.

He noted how the European Central Bank last month announced that it would pump at least 1.1 trillion euros (S$1.7 trillion) into the eurozone, with the ECB buying 60 billion euros worth of bonds each month from banks until the end of September 2016, and possibly longer.

The moves will help push interest rates down, pump liquidity in the system and hope to stimulate lending and business activity.

"These are not measures that you do unless you think there's something quite serious and this is necessary. These are very drastic actions being taken. They think it's necessary and I hope it will be helpful," said Mr Lee.

These measures alone won't be enough to solve the EU's problems, he added. There must also be fiscal policy and economic restructuring, while political arrangements need to be consolidated and integrated.

Then there are "immediate fires" to deal with such as the situation in Greece, the financially-troubled nation that is asking the bloc's other members to rewrite the bailout plan they signed with Athens previously.

In its report, the EC downgraded its forecast for the Greek economy, stressing that the uncertainties created following the recent elections could damage confidence. Growth is expected to come in at 2.5 per cent this year, down from last November's estimate of 2.9 per cent.

Mr Lee, who earlier this week visited the German cities of Dresden and Berlin, said that while Germany - the region's economic powerhouse - is reasonably confident of its own economy, it is now focused on dealing with Greece.

"The fear is not just Greece, which makes up 2 per cent of the EU's GDP, (but) the precedent that it sets. If Greece can get certain terms, then Italy would expect the same and so would Spain. The voters of Italy and Spain will expect the same too, and that would be a very serious consequence," said Mr Lee.

The prime minister described his week-long trip to Europe as a "very productive visit", adding that Singapore would look to advance its cooperation with both Germany and Spain.

He was also heartened at managing to have the support from the two countries for the EU-Singapore free trade agreement, which Singapore hopes can be ratified as soon as possible.

On the business front, Mr Lee shared that the senior executives of major Spanish companies whom he had lunch with on Thursday, representing key sectors such as banking, construction and transport, indicated their desire to expand their presence in Singapore.

"(They) are interested to come to the Far East, where they have not been active," he said. "They would like to work with Singapore and do business in the region - China, India, Asean - which they are less familiar with. I'm happy to do that and I hope we would be able to follow up on this."

Earlier on Friday, Mr Lee had an audience with Spain's King Felipe VI before a meeting with Prime Minister Mariano Rajoy.

In his meeting with the latter, the two leaders said they were happy with the state of bilateral relations and agreed to work to strengthen the flow of trade and investments between Singapore and Spain.

Mr Lee and his delegation, which includes his wife and three ministers, return to Singapore on Saturday.

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