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September 15, 2009

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Home » Business » Economy

Euro zone reported to be on cusp of recovery

THE euro zone is emerging from recession, the European Commission said yesterday even as it maintained a gloomy forecast for 2009 despite an improved outlook for the second half of the year.

In its interim forecast, the European Union's executive body said the economy of the 16 countries using the euro would contract by 4 percent this year - the same as it forecast in May.

"The growth momentum ... has therefore been revised up for the second half of this year. However, the outcome at the turn of the year proved so weak that, despite the new outlook and the better-than-expected outcome for the second quarter, the fall in GDP remains unchanged," the commission said.

"The EU economy appears to be at a turning point," it said.

EU Monetary Affairs Commissioner Joaquin Almunia said the improved outlook results mainly from "unprecedented amounts of money pumped into the economy by central banks and public authorities."

The fiscal stimulus should be continued in 2009 and 2010, but the euro zone and the EU should map out an exit strategy, with budget deficits across the bloc expected to be higher than previously thought, he said in a written statement.

"Looking into next year, however, uncertainty is rife. There are reasons to believe that the recovery could prove volatile and sub par," the commission said.

It said the German economy, the biggest in the euro zone, would contract by 5.1 percent this year, a better figure than the 5.4 percent forecast in May.

Germany's 2009 inflation was forecast to come in at 0.3 percent.

In France, the second-biggest euro zone economy, the contraction should be 2.1 percent, compared with 3 percent predicted in May, it said.


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