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Recession looms for eurozone despite stable signs in markets
Source: Agencies |
February 24, 2012, Friday
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THE 17-nation eurozone economy will suffer a modest recession this year despite recent signs of stabilization, particularly in financial markets, the European Union's executive branch said.
In its latest projections, the European Commission yesterday forecast a 0.3 percent drop in the eurozone economy, with Greece leading the way downward with a massive 4.4 percent decline.
That would be the fifth straight year of recession in Greece, which earlier this week clinched its second massive bailout package in less than two years.
In its last forecast in November, the commission predicted a 0.5 percent expansion across the eurozone economy following last year's 1.4 percent growth. The difference this time is that it now expects the economies of Belgium, Spain, Italy, Cyprus, the Netherlands and Slovenia to contract in 2012, not just Greece and Portugal.
The overall decline is limited by resilient activity in Germany and France, the eurozone's two-largest economies. Growth in Germany is penciled in at 0.6 percent while France is forecast to grow by 0.4 percent.
"Although growth has stalled, we are seeing signs of stabilization in the European economy," said Olli Rehn, European Commissioner for Economic and Monetary Affairs. "Economic sentiment is still at low levels, but stress in financial markets is easing."
He said the forecast was based on the assumption that uncertainty created by the debt crisis "will gradually fade away."
Sony Kapoor, managing director of economic think-tank Re-Define, urged Europe not to get complacent over its handling of the debt crisis.
"The sharply deteriorating economic forecasts underscore why despite the lull arising from a quietening of the acute phase of the crisis, EU policy makers must not be allowed to procrastinate and become complacent, a pattern that has characterized EU decision-making from the start of the crisis," Kapoor said.
Last November, financial markets were struck by fears that Europe's debt crisis would not be confined to the relatively small economies of Greece, Ireland and Portugal. Worries grew that Spain and Italy could get swamped by their debt loads. Both countries now have new governments to enact austerity measures.
The more benign atmosphere in financial markets has also been helped by the European Central Bank's offering of super-cheap long-term loans to banks and the decision of the 17 euro countries to tie their economies closer together.
In its latest projections, the European Commission yesterday forecast a 0.3 percent drop in the eurozone economy, with Greece leading the way downward with a massive 4.4 percent decline.
That would be the fifth straight year of recession in Greece, which earlier this week clinched its second massive bailout package in less than two years.
In its last forecast in November, the commission predicted a 0.5 percent expansion across the eurozone economy following last year's 1.4 percent growth. The difference this time is that it now expects the economies of Belgium, Spain, Italy, Cyprus, the Netherlands and Slovenia to contract in 2012, not just Greece and Portugal.
The overall decline is limited by resilient activity in Germany and France, the eurozone's two-largest economies. Growth in Germany is penciled in at 0.6 percent while France is forecast to grow by 0.4 percent.
"Although growth has stalled, we are seeing signs of stabilization in the European economy," said Olli Rehn, European Commissioner for Economic and Monetary Affairs. "Economic sentiment is still at low levels, but stress in financial markets is easing."
He said the forecast was based on the assumption that uncertainty created by the debt crisis "will gradually fade away."
Sony Kapoor, managing director of economic think-tank Re-Define, urged Europe not to get complacent over its handling of the debt crisis.
"The sharply deteriorating economic forecasts underscore why despite the lull arising from a quietening of the acute phase of the crisis, EU policy makers must not be allowed to procrastinate and become complacent, a pattern that has characterized EU decision-making from the start of the crisis," Kapoor said.
Last November, financial markets were struck by fears that Europe's debt crisis would not be confined to the relatively small economies of Greece, Ireland and Portugal. Worries grew that Spain and Italy could get swamped by their debt loads. Both countries now have new governments to enact austerity measures.
The more benign atmosphere in financial markets has also been helped by the European Central Bank's offering of super-cheap long-term loans to banks and the decision of the 17 euro countries to tie their economies closer together.
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