European Commission Slashes Euro-Zone's Economic Outlook (Socialism At Work)

The Wall Street Journal ^ | 10/29/03 | Associated Press

[Pubbie]

The European Commission Wednesday slashed its economic-growth forecast for 2003 for the euro zone and said that even though things are slowly picking up, unemployment would probably worsen next year.

In its biannual economic forecast, the commission, the European Union's executive arm, projected "a mere 0.4%" growth this year in the 12 countries using the euro, down from the already anemic 1% estimated in April. That would be less than half of last year's growth rate and the third subpar year in a row.

For the full 15-member EU -- including Britain, Sweden and Denmark -- growth for 2003 was expected to come in at 0.8%, down from April's 1.3% forecast.

The "disappointing economic performance" was blamed on uncertainties surrounding the Iraq war, the "prolonged stock market decline" and worries about jobs and pensions, which shattered consumer and business confidence, the commission said.

Next year Europe should return to average growth -- 1.8% in the eurozone and 2% for the EU as a whole -- spurred by "encouraging signals" from the U.S. and Asian economies.

But the report also warned that job creation, at a standstill since the second half of 2002, would take even longer to rebound, particularly in manufacturing and construction.

It cited "the need for firms to focus on cost reductions ... together with the prospects for a mild recovery" as drags on job creation and warned another upward spike in the euro exchange rate could hurt export-dependent firms.

Joblessness, which peaked near 10% in the mid-1990s, had been on the decline until the recession of 2001.

The euro-zone rate was forecast to rise to 8.9% in 2003 and 9.1% in 2004 before turning around slightly in 2005 back to 8.9%. For the full EU, the projected figures were 8.1% in 2003, 8.2% in 2004 and 8.1% in 2005.

"These figures show the challenge we are facing and the need to accelerate labor market reforms in the union," said EU Economic Commissioner Pedro Solbes.

The report said the economic recovery was expected to be aided by gradually easing of oil prices, to around $24 or $25 a barrel, and stabilization in the stock markets. It also cited low interest rates and falling inflation, which it forecast at 2.1% this year, 2% next and 1.7% in 2005.

"The main downside risk is related to the sustainability of the U.S. recovery," Mr. Solbes added, citing concerns about deficits in the U.S.

Despite the gathering pace of the recovery, the euro zone's two biggest economies, Germany and France, were not expected to get their budgets under control any time soon.

The Commission said Berlin could get its deficit under the 3% of gross domestic product cap in 2005 -- but only if the German government manages a "full implementation of the announced proposals." It forecast deficits of 4.2% this year and between 3.25% and 3.9% in 2004, depending on the savings the German government can get through both houses of parliament.

Paris has pledged to trim its public deficit to 3.6% of GDP in 2004 and below the 3% limit in 2005. But the commission said its analysis foresees only a "marginal" improvement in the red ink, from 4.2% this year to 3.8% in 2004 and 3.6% in 2005.

EU finance ministers were to consider Mr. Solbes' recommendations for improving France's budget picture at a meeting next week, including more budget-trimming than Paris had planned next year.

Paris has resisted and Mr. Solbes refused to say what the commission's next step would be if the recommendations are blocked.

Under EU rules, the commission can propose fines of up to 0.5% of GDP on budget sinners but that would also require approval by finance ministers.

The report said average growth in the 10 countries joining the EU next year, mostly from eastern Europe, "remained solid" with a forecast of 3.1% in 2003.

[Pubbie]

Socialism DOES work, they just haven't found the "Right People" to run it yet.

[Pubbie]

*Ping*!

[wizardoz]

The "disappointing economic performance" was blamed on uncertainties surrounding the Iraq war,

Translation: It's all Bush's fault. Waaahhhhhh.....

[Pubbie]

Then how come Japan is having a rebound?

Oh well, whatever happens, it is ALWAYS Bush's fault from the Western Euro's perspective.

[expatpat]

They are waiting for another Genghis Kahn, Adolf Hitler, or Joseph Stalin to turn up.

[goldstategop]

Europeans hate capitalism. They'd rather starve than do what it takes to beat the U.S economically.

[blanknoone]

spurred by "encouraging signals" from the U.S. and Asian economies. Even their pathetic 'recovery' is imported. They are a warning another warning to us. I would have thought the collapse of the Soviet Union, the Chi-Coms abandoning communism and the economic state of Vietnam, Cuba and North Korea would suffice, but Europeans and Liberals don't seem to get it....socialism=poverty