Eurozone faces recession throughout 2012
Source: BI-ME with AFP , Author: Posted by BI-ME staff
Posted: Thu February 23, 2012 1:50 pm

INTERNATIONAL. More bad news hit the eurozone on Thursday as EU data predicted recession throughout 2012, with a 0.3%contraction compared to 0.5% growth and a likely downturn in the previous November forecast.

"The unexpected stalling of the recovery in late 2011 is set to extend into the first two quarters of 2012," the European Commission said on Thursday.

But it stressed that it still saw a "mild recession with signs of stabilisation."

Announcing the numbers, European Union Economy Commissioner Olli Rehn put the figures into context by comparing the eurozone prospects to overall global growth which he expected to be 4.3% this year.

Unusually, the EU executive fed in data from all 27 EU states -- not just the seven biggest -- in a bid to make its forecasts more robust.

The 0.8% downward revision in the space of just over three months underlines the importance of forecasting for the likes of Greece, where wide variations were presented to finance ministers this week as they took decisions on debt sustainability in that country.

The European Commission said "modest growth is predicted to return in the second half of the year," with inflation revised "slightly upwards" to 2.1% across the 17-state euro currency area, mainly due to energy costs and "increases in indirect taxes."

A fifth year of recession in Greece is now expected in Brussels to result in a 4.4% contraction of gross domestic product in 2012.

As the Greek government pursues a 107-billion-euro (US$142 billion) write-down of private debt and a fresh 130-billion-plus bailout from international backers, the figure was however better than the 5.5% slide forecast in December by Prime Minister Lucas Papademos.

However, Italy, which carries the eurozone's biggest debt burden of about 1.3 trillion euros, faces a recession that will cut output by 1.3% in 2012.

The last official forecast from the government in Rome was for a 0.4% fall, although the Bank of Italy last month tipped between 1.2% and 1.5%, while the IMF predicted an even worse result, a 2.2% drop.

There will be a 1.0% recession in Spain, according to the data, but Germany's economy would grow 0.6% and that of France 0.4%.

Outside the eurozone, Poland maintains its position as a powerhouse economy, with 2.5% growth now predicted -- dimmed compared to stellar performance prior to the debt crisis, but still way out in front.

"One essential reason is Poland has been benefiting from the engine of the German economy, it has had a positive spillover," Rehn said, although he also credited a large influx of EU funding with influencing Poland's progress.

The economy across the United Kingdom, which has its own lopsided patterns too, is tipped to grow by 0.6 percent.

"Although growth has stalled, we are seeing signs of stabilisation in the European economy," Rehn said highlighting "easing" stress in financial markets.

The Commission cited a "less supportive" global economy "weighing on net exports" as well as low business and consumer confidence in Europe, although the forecast maintained that "a credit crunch has been avoided."

In a clear sign of structural divergences, the Commission noted that "Greece, Portugal and Spain account for 95 percent of the rise in unemployment in the EU since late 2010."

 

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