Eurozone revises date for economic recovery
BRUSSELS — The European Union predicted Friday the 17 member countries that use the euro will see economic fortunes improve as the year goes by even though it expects the recession to last longer than it previously thought.
In its winter forecast, the EU Commission, the EU’s executive arm, said the eurozone is likely to contract a further 0.3 per cent this year, in contrast to its prediction last November of 0.1-per-cent growth.
Across the eurozone, the Commission said the debt crisis and the associated budget tightening continue to weigh on activity. Figures last week showed the eurozone contracted by 0.6 per cent in the final quarter of 2012 from the previous three-month period. The eurozone has been in recession — officially defined as two consecutive quarters of negative growth — since the second quarter of 2012, when concerns about the future of the euro currency were particularly acute.
Many countries are in deep recessions, such as Greece and Spain, as they push oftensevere spending cuts and tax increases to get a grip on their public finances. Others have suffered in the fallout, such as Germany, Europe’s largest economy, which contracted by a quarterly rate of 0.6 per cent in the final quarter of 2012 as its main export markets in Europe faltered.
Despite what it terms “headwinds,” the Commission said it expects the eurozone recession to bottom out over the first half of 2013. By the fourth quarter of 2013, it forecast that the eurozone economy will be 0.7 per cent bigger than the same period in 2012. In 2014, growth of 1.4 per cent has been pencilled in.
A number of recent economic confidence indicators have pointed to an improving outlook, particularly in Germany. Much of the recent calm in financial markets with regard to the eurozone has been credited to the debtreduction measures taken by many countries and a commitment by the European Central Bank’s president Mario Draghi to do “whatever it takes” to save the euro.
“The decisive policy action undertaken recently is paving the way for a return to recovery,” said Olli Rehn, the Commission’s top economic official.
The wider economy of the 27-nation EU, which includes non-euro members such as Britain and Poland, is also bottoming out, says the Commission. Here too, the Commission lowered its 2013 growth forecast from 0.4 per cent to 0.1 per cent. And in 2014, it expects the world’s largest economic bloc with 500 million people to grow by 1.6 per cent.
One of the key problems afflicting Europe at the moment is unemployment, and the Commission said a marked improvement was unlikely any time soon, with the jobless rate in the EU rising to 11 per cent and the eurozone rate swelling to a record 12 per cent.
While unemployment is high overall, the trend is not uniform: Germany has seen unemployment falling. In Greece and Spain, unemployment already is over 25 per cent and expected to rise to around 27 per cent.