Mild Recession Expected For The European Union
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The European Commission has said in a report that the region’s divergent economies are staring at a bleak outlook, with a mild recession at the horizon that could turn far worse.
The 17-nation euro economy will contract 0.3 percent, the commission said, abandoning a November forecast of 0.5 percent growth. The downgrade was mainly due to projected contractions of 1.3 percent in Italy and 1 percent in Spain.
Olli Rehn, European Union Economic and Monetary Commissioner said:
The European Commission has said in a report that the region’s divergent economies are staring at a bleak outlook, with a mild recession at the horizon that could turn far worse.
The 17-nation euro economy will contract 0.3 percent, the commission said, abandoning a November forecast of 0.5 percent growth. The downgrade was mainly due to projected contractions of 1.3 percent in Italy and 1 percent in Spain.
Olli Rehn, European Union Economic and Monetary Commissioner said:
[quote] The euro area has entered into a mild recession. Prospects have worsened and risks to the growth outlook do remain, but there are signs of stabilization. [/quote]His comments comes days after Greece secured a second bailout deal, though uncertainty over future growth and brewing tensions between Iran and the West could destabilize recovery prospects even further.
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Besides Italy and Spain, countries such as Portugal, Ireland and Spain also are struggling to get their economies back on track. This has lead to leaders and economists questioning if the crisis response has paid too much attention on austerity and too little on growth.
Earlier this week, the leaders of 12 countries in the European Union sent a letter to top E.U. officials urging more action for economic expansion.
However, Rehn insisted that “decisions will be taken once we have a full picture”.
Economists say the European troubles will put a drag on the U.S. economy, though the magnitude of the impact depends on how poorly the European economy fares.
For now, the eurozone’s two strongest economies Germany and France have managed to avoid recession and are set to grow in 2012, but only at 0.6 percent and 0.4 percent respectively.
Related News: At A 10-Month High, German Confidence Beats Expectations
Gus Faucher, senior economist at PNC Financial Services, talking about the European and United States’ economies, said:
[quote] If the problems in Greece are contained and the European recession is mild, as we believe it will be, the U.S. should be able to withstand without going into a recession. [/quote]Related Story: Solutions to the Eurozone’s Problems Miss the Mark: George Friedman
Related Story: Diseased and Dangerous – The US and Europe’s Grand Debacle: Joseph Stiglitz
