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| Europe |
| EU refuses to rule out downgrading economic forecasts |
| 2009-03-03 |
| EU Monetary Affairs Commissioner Joaquin Almunia on Tuesday refused to rule out further downgrades to the European economic outlook, warning of deepening risks from the global downturn. On January 19, the European Commission estimated that the eurozone economy would shrink by 1.9 percent this year while the 27-nation European Union would see a contraction on the order of 1.8 percent. It forecast that Europe would return to growth in 2010 with economic expansion of 0.4 percent among the 16 countries using the euro single currency, and 0.5 percent in the EU. "When we presented the forecasts on January 19, I said the risks are broadly balanced," Almunia said at the European Policy Centre think-tank. "Now I can say downside risks are bigger," he said. Almunia also held out the possibility that EU governments might have to ramp up their economic stimulus plans if existing packages fail to snap Europe out of an increasingly dire recession. European governments are ploughing hundreds of billions of euros into their economies in hope of reviving activity, but economic data keep going from bad to worse while their budget deficits balloon in the meantime. Concerns are growing about how to finance the widening gap between government revenues and spending. One of the most radical ideas in Europe is for countries to issue bonds together as a group. Almunia said that it was up to member states to decide on such a joint bond issue, adding that "if you ask is it reasonable? Yes, it's reasonable." "It's not politically viable today, but perhaps one day in the future" it would be, he said. While Italy has led calls for the issue of so-called euro bonds, economic powerhouse Germany, which enjoys the lowest interest rates on its government debt, has poured cold water on the idea. Almunia also dismissed lingering market concerns about the possibility that a member of the eurozone could be forced to leave the 16-nation bloc if deficits get out of control. "Who's crazy enough to leave the euro area? Nobody," he said. Almunia said that the EU had means of aiding a eurozone country with financing troubles before it would have to turn to the International Monetary Fund, but refused to say precisely what could be done. "We're equipped to face ... a crisis scenario but these kind of things should not be talked about in public," he said. Currently, there is no formal solidarity mechanism within EU treaties to assist eurozone countries that run into financing troubles, although there is an arrangement for non-euro members of the European Union. |
| Posted by:tipper |
| #1 For the last 2 years economic forecasts haven't been worth the air they were written on. The MSM scrupulously avoids mentioning this comprehensive failure of foresight. |
| Posted by: Anguper Hupomosing9418 2009-03-03 12:25 |