EU faces deep, broad recession, Brussels says
Brussels - Europe faces a deep and broad recession this year, the European Commission predicted Monday, with economic activity in the 16-strong eurozone set to shrink by 1.9 per cent as a result of the world's worst economic crisis since World War II.
"The economic horizon has now significantly darkened as the European Union economy is hit by the financial crisis that deepened during the autumn and is taking a toll on business and consumer confidence," the European Union's executive arm said in presenting its latest economic forecasts.
These predict that Gross Domestic Product (GDP) in the 27-strong European Union will contract by 1.8 points, with consequent steep rises in the member states' unemployment and budget deficit figures.
GDP in 2008 grew by 1.2 per cent in the 16-member eurozone and by 1.4 per cent in the EU.
Europe's economic locomotive, Germany, is set to experience its worst downturn in more than 60 years, with GDP predicted to fall by 2.3 per cent year-on-year.
Other European heavyweights such as France, Britain and Italy are also bracing themselves for a painful year, with GDP set to shrink by 1.8, 2.8 and 2.0 per cent respectively.
The downturn will push unemployment levels to their highest in a decade, with the EU-wide figure set to hit 9.5 per cent by 2010. Average EU unemployment was just 7.0 per cent in 2008.
"Except for government consumption and public investment, all demand components are forecast to put a drag on GDP growth," the commission said in presenting its forecasts.
According to the EU's executive, economic activity is only set to pick up during the second half of 2009 and return to modest growth levels of around half a percentage point in 2010.
Despite warnings from the bloc's economic and monetary affairs commissioner, Joaquin Almunia, a slew of member states is set to breach the bloc's iron rule that governments' budget deficits should not exceed 3 per cent of GDP, causing the euro area's average to hit 4.0 per cent of GDP in 2009.
In the meantime, the only good news continues to come from consumer prices, with the euro area's annual inflation figure set to fall from 3.3 per cent in 2008 to 1 per cent this year on the back of falling commodity prices.
The EU executive has called on member states to contribute to an unprecedented economic recovery plan worth 200 billion euros (266 billion dollars), or 1.5 per cent of the EU's GDP, in public spending.
Measures announced by national governments so far amount to about 1 per cent of GDP, the commission said. (dpa)