EU Emerging From Recession, Uncertainty Remains

EU economic and monetary affairs commissioner Joaquin Almunia reports on the commission's bi-annual interim economic forecast at EU headquarters in Brussels on September 14, 2009. The European Union economy will shrink by four percent in 2009 but will climb out of recession in the third quarter, the European Commission forecasted. But the recovery from recession will be weighed down by rising unemployment and strained government finances. (John Thys/AFP/Getty Images)

A new report from the European Commission gives hope for an end to the recession in Europe, but is reserved on how strong the recovery will be.

The report, published on Sept. 14, sees signs of recovery after strong government stimulus. European Union Monetary Affairs Commissioner Joaquin Almunia suggested that state recovery packages be continued next year to ensure stability. Gross domestic product (GDP) growth is expected to be in the black by the second half of the year.

The forecast for 2009 remains unchanged, however, with the decrease of GDP at four percent for the whole EU.

The first half of 2009 is characterized with a slowdown in consumer-price inflation, which was previously maintained by high energy and food prices. In July it reached 0.2 percent, while in the Eurozone it was -0.7 percent. With prospects for imminent recovery, inflation is also expected to go up toward the end of the year.

The biggest European economies, Germany and France have already officially emerged from recession. The United Kingdom’s economy, which is outside the Eurozone, is expected to grow by 0.2 percent within the third quarter, thus exiting the crisis.

Despite upbeat moods in the EU, the light at end of the tunnel is still dim. The sustainability of the recovery will be examined again in the European Commission’s next report, which will be announced on Nov. 3, 2009.

The Commission publishes quarterly reports with economic forecasts. Figures in the reports are based on macroeconomic analysis of the major European countries’ economies: France, Germany, Italy, the Netherlands, Poland, Spain and the U.K.—which together account for nearly 80 percent of the EU’s GDP.

[etDetailsBox Q4/2009 GDP Forecast]
Germany: 0.1
Spain: -0.2
France: 0.3
Italy: 0.1
Netherlands: 0.0
Euro area: 0.1
Poland: 0.0
United Kingdom: 0.5
EU27: 0.1
[/etDetailsBox]

Source: European Commission