Grigory Burenkov: Europe on the path to recovery

There is now almost no doubt that after several years of large-scale economic upheavals, Europe is on the verge of a new stage of recovery, — says Cypriot financial analyst Grigory Burenkov. —'' Of course, the consequences of the pandemic, the energy crisis, and geopolitical tensions are still being felt. This is especially noticeable in key sectors: industrial production, exports, and consumption, which hinders rapid recovery. However, despite the slow growth, many sectors are showing positive changes.''

Indeed, in 2024, the Eurozone’s GDP growth is forecast to be a modest 0.7%. But, although this figure is below expectations, it indicates that the EU economy has managed to avoid the deep recessions many were preparing for in recent years.

'' The key factor remains the fragility of this growth,'' explains Grigory Burenkov. It is heavily dependent on external and internal conditions, including inflation expectations, the recovery of global supply chains, and stabilisation in energy markets.

Inflation and monetary policy: long-awaited relief

After several years of rising inflation, which seriously impacted businesses and consumers, Europe finally breathed a sigh of relief in 2024. According to Eurostat, inflation in the Eurozone dropped to 1.8% in September. This achievement was partly due to the active efforts of the European Central Bank (ECB). One of the key measures in the fight against inflation was the tightening of monetary policy in previous years, during which the ECB consistently raised rates to cool the overheated economy.

However, in 2024, as inflation began to slow down and pressure on supply chains eased, the regulator changed course. Twice — first in June, and then in September — the ECB cut the key interest rate.

At that time, Christine Lagarde, head of the ECB, rightfully stated:''We have proven that we can stabilise prices while continuing to support the economy. This is an important step towards sustainable recovery and improving the well-being of Eurozone citizens.''

According to Grigory Burenkov, in the coming years, the reduction of rates and the stabilisation of price levels will play one of the most important roles in the recovery of Europe's economy. '' According to forecasts, inflation in 2024 in the Eurozone will remain close to the ideal level of 2%. This will significantly help economic development, especially in conditions of geopolitical uncertainty,  says the expert. Moreover, the emerging stable conditions will help reduce inequality between more and less-developed EU countries. In particular, the situation in the southern Eurozone countries, which were most affected by the crises of past years, will improve''

Support for innovation and growth of private investments

In 2024, EU countries took active steps to support innovation and entrepreneurship. It is expected that investments in digital technologies in Europe will reach €100 billion in 2024, marking an important step toward strengthening the region's competitiveness.

For example, Paris launched the ''France 2030'' program, aimed at supporting venture capital and technology startups. Within this framework, over €30 billion is planned to be invested in innovations by 2025, creating approximately 200,000 jobs and stimulating economic growth. French President Emmanuel Macron emphasised the importance of this direction, stating ''Europe must take a step forward, using innovation to overcome current challenges and strengthen economic stability''

Another key factor in the EU's economic recovery, according to the International Monetary Fund (IMF), is the private sector. Positive changes are also observed here. In 2024, the EU recorded growth in private investments in various research and development fields. For example, in Germany, investments in renewable energy and technology sectors increased by 6%. In Italy, private investments in industry and high technologies grew by 7.2%. In the Netherlands, investments in startups and innovations rose by 9%.

''According to statistical agencies, the overall growth of private investments in the Eurozone in 2024 has so far reached 8%, — notes Grigory Burenkov. — And this is an extremely positive signal for businesses and the EU economy''

Diversification of energy sources

In 2022-2023, the EU faced one of the most severe crises due to the reduction in energy supplies. The Eurozone is still dealing with the consequences of this crisis, but these efforts are showing results. By 2024, significant progress was made in diversifying energy sources. As part of the REPowerEU program, the European Commission allocated more than €300 billion by 2025 to develop solar and wind energy infrastructure.

According to data from the European Commission, the share of renewable energy sources (RES) in the overall energy mix increased to 25%, marking a significant step forward. In just the first part of this year, the consumption of RES in Europe increased by 14%.

Grigory Burenkov believes that all these efforts are aimed at achieving energy independence and long-term stability. ''Ultimately, this will help reduce the impact of crises on the European economy,'' says the expert. European Commissioner for Energy, Kadri Simson, shares a similar view, ''Europe is moving towards a more sustainable energy model, which will become the foundation for long-term economic growth.

Labor market revitalisation

Active investments in renewable energy and digitalisation in several EU countries have contributed to positive changes in the Eurozone labor market. According to Eurostat, employment in high-tech sectors grew by 12% in 2024.

For example, in Germany, the volume of investments in renewable energy increased by 30% compared to 2023, creating thousands of new jobs. As a result, Berlin saw a drop in unemployment to 3.5%. Unemployment has been decreasing in most EU countries over the past year. In the Netherlands, it dropped to 3.6%, in Austria to 5.4%, and in France to 7.2%. Overall, the unemployment rate in the Eurozone fell to 6.4% in 2024, marking the lowest level in recent years.

''Sustainable growth in employment and real wages in the EU undoubtedly contributes to the recovery of private consumption and investment activity, notes Grigory Burenkov, which, of course, has an exclusively positive effect on the overall economic revival in the Eurozone.''

The path to sustainable development

Despite positive shifts, the EU economy still faces many challenges that are in the process of being addressed. For instance, the trade deficit, partly due to a decrease in demand for industrial equipment and automobiles, remains a concern. Additionally, there are difficulties associated with weak business activity and low labor productivity, which in the EU is 20% lower than in the United States.

''Yes, there are still many problems'' acknowledges Grigory Burenkov. ''But it’s clear that Europe is gradually overcoming the crises. Despite the various challenges, the steps taken by the European Union show its readiness for change. I agree with the politicians who are now saying that Europe is currently undergoing significant changes that will shape its development for decades to come. By overcoming difficulties now, the EU is securing prosperity for future generations,'' concludes Grigory Burenkov.

* Grigory Burenkov is a Cypriot financial analyst and investor, a columnist for socio-political publications, and the founder and CEO of Wheelerson Management. He is also the owner and a member of the board of directors of Osome Group.