Modest EU growth expected
Source: Agencies |
November 4, 2009, Wednesday
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Print Edition
Print Edition
THE European Commission yesterday predicted that the European Union and eurozone would grow in 2010 at a modest rate of 0.7 percent.
In May, it said the economies would likely shrink 0.1 percent in 2010.
The EU executive said a "better-than-expected" rebound in the second half of 2009 would likely be followed by slower growth early next year.
The EU and eurozone probably exited recession in the third quarter of 2009, it said, after five consecutive quarters of negative growth.
The first official third-quarter figures are due out on November 13.
It warned that the upturn was "largely driven by temporary factors" as companies restock after a spending freeze and governments spend billions of euros on economic stimulus programs to stoke growth.
The EU did not change its estimate for the economy of the 16 nations that use the euro to contract by 4 percent this year. It downgraded the figure for the economy of the entire 27-nation EU to shrink by 4.1 percent in 2009, from an earlier estimate of 4 percent.
High unemployment and financial deleveraging - as companies pay off large debts - would likely dampen growth in the longer term, it said.
The EU was less pessimistic about how high the jobless rate would rise. It earlier forecast the eurozone rate rising to a post World War II record of 11.5 percent in 2010 but now sees the rate rising from 9.5 percent this year to 10.7 percent next year.
Inflation would remain low for the next two years, it said, well below the European Central Bank guideline of just under 2 percent. This may sap the case for raising rates from a record low of 1 percent in the eurozone.
The EC sees eurozone inflation at 0.3 percent in 2009, rising to 1.1 percent in 2010 and 1.5 percent in 2011.
The cost of bailing out banks, boosting the economy and spending far more on welfare payments to the growing number of the unemployed has loaded European governments with debt as tax revenue collapses.
The EU said nations would risk long-term sustainability if they continued to run large budget gaps while their populations aged, with fewer workers paying for health care and social security.
In May, it said the economies would likely shrink 0.1 percent in 2010.
The EU executive said a "better-than-expected" rebound in the second half of 2009 would likely be followed by slower growth early next year.
The EU and eurozone probably exited recession in the third quarter of 2009, it said, after five consecutive quarters of negative growth.
The first official third-quarter figures are due out on November 13.
It warned that the upturn was "largely driven by temporary factors" as companies restock after a spending freeze and governments spend billions of euros on economic stimulus programs to stoke growth.
The EU did not change its estimate for the economy of the 16 nations that use the euro to contract by 4 percent this year. It downgraded the figure for the economy of the entire 27-nation EU to shrink by 4.1 percent in 2009, from an earlier estimate of 4 percent.
High unemployment and financial deleveraging - as companies pay off large debts - would likely dampen growth in the longer term, it said.
The EU was less pessimistic about how high the jobless rate would rise. It earlier forecast the eurozone rate rising to a post World War II record of 11.5 percent in 2010 but now sees the rate rising from 9.5 percent this year to 10.7 percent next year.
Inflation would remain low for the next two years, it said, well below the European Central Bank guideline of just under 2 percent. This may sap the case for raising rates from a record low of 1 percent in the eurozone.
The EC sees eurozone inflation at 0.3 percent in 2009, rising to 1.1 percent in 2010 and 1.5 percent in 2011.
The cost of bailing out banks, boosting the economy and spending far more on welfare payments to the growing number of the unemployed has loaded European governments with debt as tax revenue collapses.
The EU said nations would risk long-term sustainability if they continued to run large budget gaps while their populations aged, with fewer workers paying for health care and social security.
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