The European Commission’s new deep recession prediction includes a sharp rise in unemployment for the region and a more than doubling of the euro zone’s budget deficit this year to four percent, going even higher next year.
It said the top priority is to make anti-recession measures work effectively. The region’s economic growth has declined at a spectacular rate. From 2007’s 2.8 percent to this year’s predicted slide of almost two percent. And for the future? Carsten Brzeski, senior economist with ING said: “We can expect probably much more fiscal stimulus then we are seeing right now, boosting disposable income, boosting private consumption and a weaker euro than we have right now, they should boost exports over some time. And all these three factors together should more or less feed through into the euro zone economy in the second half of 2009.” Some countries are likely to suffer far worse than others, according to the EU economists. That is reflected in credit agencies starting to cut credit ratings. Ireland’s economy is seen as shrinking 6.3 percent. Britain’s is predicted to decline by 2.8 percent, Germany by 2.3 percent, Italy and Spain two percent and France 1.8 percent. Just a month ago, the European Central Bank’s forecast was much more optimistic, but ECB President Jean-Claude Trichet, speaking just hours after Brussel’s latest forecast was released, said the outlook now is substantially worse though he added 2010 will be the year of recovery.