EU says euro zone already in recession

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EU says euro zone already in recession

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The 15 countries using the euro are already in a technical recession the European Commission has calculated.

That means in the last two quarters the region’s overall economy contracted.

Economic and Monetary Affairs Commissioner Joaquin Almunia said there are good and bad things going on: “The situation in the markets remains precarious and the crisis is not yet over. This means weaker growth, the crisis is aggravating macro-economic imbalances in several countries. On the positive side, inflationary pressures are easing, but this easing of inflationary pressures – including the evolution of oil prices – to some extent also reflects a significant weaker demand.”

The Commission sees euro zone growth at 1.2 percent this year, slowing to 0.1 percent next year and improving to 0.9 percent in 2010.

Britain’s economy is predicted to contract by one percent next year putting it into a true recession.

Brussels’ inflation forecasts gives the green light to the European Central Bank to reduce interest rates by as much as 0.5 percent this week.

That would be the second reduction in less than a month.

There is speculation of even more to follow as the ECB focus moves away from controlling inflation and on to boosting the euro zone’s flagging economic growth.