It will be the second half of next year before Europe’s economy starts to recover from the recession.
That is according to the European Commission which has just slashed its forecasts for the economy of the 16 countries using the euro. The Commission’s economists believe it will shrink by four percent this year – that is twice as bad as its projection of just three months ago – and by 0.1 percent next year. That brings it more in line with forecasts from the International Monetary Fund and the Organisation for Economic Cooperation and development. The euro zone budget deficit is also predicted to triple to 6.5 six and a half percent of GDP. But Brussels’ top money man was cautiously upbeat. Economic and Monetary Affairs Commissioner Joaquin Almunia said: “Some positive signals have appeared in the last weeks, improvement of the evolution of the financial markets, improvement in business expectations and some real indicators as, for instance, export data in Asia.” The Commission said the main factors behind its downgrading of the economic outlook are “the worsening of the global financial crisis, a sharp contraction in world trade and ongoing housing market corrections in some economies.” But Almunia added: “We are no longer in free fall.” However it will still be some time before there is any effect on unemployment. The European Commission is predicting a jobless total of 11.5 percent of the working population next year.