EU warns of recession
Growth has come to a standstill, Commission says, as five member states are told to do more to cut deficits.
Economic recovery in the EU has come to a standstill and there is a risk of another recession, Olli Rehn, the European commissioner for economic and monetary affairs, said today.
He also told five EU member states – Belgium, Cyprus, Hungary, Malta and Poland – that they had to do more to cut their deficits.
Speaking at a press conference in Brussels, Rehn said that the European Commission had forecast that growth in the EU would be 0.6% in 2012, with the figure at 0.5% in the eurozone.
Rehn said that the outlook for growth had deteriorated sharply since the Commission’s forecasts in April. He said that global growth prospects were lower than predicted, down to 3.5% from 4.1%, which had an impact on the EU’s export potential. He said that the eurozone sovereign-debt crisis had had a knock-on effect on the global economy. Uncertainty about banks’ exposure to eurozone debt had reduced inter-bank lending and the provision of credit, he said. The debt crisis had caused a sharp fall in confidence, he added.
Growth was expected to pick up in 2013, Rehn said, but would be “lacklustre”, at just 1.5% for the EU and 1.3% for the eurozone.
Unemployment was expected to remain at around 9.5%, he said.
Rehn said that EU countries were expected to make progress in reducing public deficits and debt levels, although some countries needed to take more action.
Fiscal deficits in 2011 were forecast to be 4.7% of gross domestic product (GDP) in the EU and 4.1% in the eurozone. In 2012, the deficit would fall to 3.9% in the EU and stay at 4.1% in the eurozone. Progress in reducing debt levels would be slower, Rehn said. The average debt-to-GDP ratio in the EU would be 85% in the EU in 2012 and 91% in the eurozone.
Rehn said that market worries about debt levels underlined the importance of member states consolidating their public finances. He said that Belgium, Cyprus, Hungary, Malta and Poland needed to make bigger efforts to reduce their deficits. Rehn said he would be writing to the five governments to ask them to give details of “sufficient permanent fiscal measures” to cut their deficits.
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