BRUSSELS, Belgium – The European Commission forecast Monday that the economy in the 15 countries using the euro barely grow next year, expanding only 0.1 percent as the financial crisis hit hard.
The currency zone’s largest economies will reach a dead end or reduce, said in its latest economic outlook, with Germany, France and Italy does not grow at all in the 0.0 per cent.
Ireland and Spain see the output and falling unemployment lines and swelling public deficit, the EU executive said.
Among EU members who do not use the euro, the UK’s economy falling into recession with less than 1 percent growth, while Baltic states Estonia and Latvia also see negative growth.
The 27 EU members warned that things could be even worse as forecasters could not rule out a credit deeper than the brake of the economy, public finances and put a strain near freezing in household spending.
Even slightly higher costs for loans – an additional risk premium of 0.5 per cent in interest rates – to tighten credit to households and could “trigger an outright recession, a decline of 1 percent of GDP in the euro area, “he said.
The labor market should deteriorate drastically next year, he said, with unemployment in the euro zone rise to 8.4 percent in 2009 from a decade-low of 7 percent in late 2007.
Spain will see the worst of this as a bubble in housing and tourism slows. The unemployment rate shot up in May to 15.5 percent in 2010 from 10.8 percent this year, the EU said.
EU economists said the outlook for the euro zone and the rest of the 27-nation EU “remains bleak”, with growth in hiring this winter before recovering gradually towards the end of next year as exports begin to gather.
Said the euro zone probably fell in the third quarter of 2008 and may grow 1.2 percent for the whole year, 0.1 percent next year and 0.9 percent in 2010. EU forecasts that gross domestic product this year at 1.4 percent, falling to 0.2 percent in 2009 and 1.1 percent in 2010.
The only ray of light that is reflected in a slide in inflation, down from record highs to an average of 2.2 percent next year as oil prices cool down quickly. This can increase the amount of money that people have to go through, but may be less likely to shop if they fear job losses. Private consumption is almost flat, he said.
Oil prices should fall of 2008 an average of $ 104 per barrel to 86 U.S. dollars next year, he said. However, food and metal prices will probably stay at high levels.
The cost of the rescue of banks in difficulties, while fiscal revenue and reduce welfare payments swell governments pile on more debt and run a deficit, the EU executive warned.
It is said that France and Ireland to break the EU budget rules in 2009 for operating an annual deficit of more than 3 percent of GDP. The ceiling is intended to keep its currency stable shared. Britain, Latvia, Lithuania, Romania and Hungary also likely to exceed the limit.