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EU emerging from recession


Monday, September 14th, 2009

The European Union is emerging from recession but gross domestic product (GDP) in the EU and the euro area is still expected to fall by 4 per cent this year according to an interim forecast released this week.

The EU economic and monetary affairs commissioner, Joaquin Almunia, said uncertainty remained rife.

“The situation has improved – mainly due to the unprecedented amounts of money pumped into the economy by central banks and public authorities – but the weak economy will continue to take its toll on jobs and public finances,” he said.

The Commission left unchanged its forecast for inflation in 2009 at 0.9 per cent in the EU and 0.4 per cent in the euro area although the forecast said inflation was set to increase towards the end of the year.

The fall in EU GDP slowed significantly in the second quarter to -0.2 per cent quarter-on-quarter from -2.4 per cent in the first quarter of 2009.

Almunia said the recovery might surprise on the upside in the short term but “how sustainable it will be remains to be seen.”
“We need to continue implementing the recovery measures announced for this year and 2010 and accelerate the repair of the financial sector to make sure banks are ready to lend at reasonable terms when companies and households resume their investment plans,” he said. “And we need to define a clear, credible and coordinated 'exit' strategy to put public finances progressively back on a sustainable path and to find the necessary resources to increase Europe's growth and jobs potential.”

The forecast found that both private and public consumption in Europe had held up well but the full impact of the financial crisis on labor markets and public finances was still to come and the correction in housing markets continued to hold back construction investment in several countries.  It warned the recovery may be volatile.