The FINANCIAL — The European Commission said on September 14 that the European Union is emerging from recession, but the recovery from recession will be weighed down by rising unemployment and strained government finances.
"The economy appears to be at a turning point," the commission said, according to BBC. But because the economy contracted by more than expected in the first half, the overall annual forecast has remained unchanged at -4%. Separately, official figures showed that eurozone industrial production fell by 0.3% in July compared with the previous month.
European companies from Germany’s ThyssenKrupp AG to France’s L’Oreal SA have reported results that beat analysts’ estimates, suggesting government efforts to encourage spending are feeding into the broader economy, Bloomberg gives information. European Central Bank President Jean-Claude Trichet on Sept. 3 cited “increasing signs” of stabilization. Investors grew more optimistic this month and economic confidence is at a 10-month high.
“The situation has considerably improved over the past months,” said Juergen Michels, chief euro-region economist at Citigroup in London, as the same source reported. “The second half will be more positive, but we can’t expect a boom. The recovery will continue through 2010.”
Official statistics for the third quarter have not yet been published and the EU's figure is an estimate based on growth in the seven largest EU nations, according to AP. The European Commission said it was not changing its forecast for the year because the economy fared worse at the end of 2008 and the beginning of 2009. It warned that "uncertainty remains rife" on how strong the recovery will be.
"The situation has improved — mainly due to the unprecedented amounts of money pumped into the economy by central banks and public authorities — but the weak (broader) economy will continue to take its toll on jobs and public finances," said Economic and Monetary Affairs Commissioner Joaquin Almunia in a statement, as AFP reported.
Almunia credited massive support from governments and central banks for the bloc's revived economic prospects. He added that recovery measures planned for this year and 2010 need to be implemented, The Wall Street Journal gives information. He noted that the bloc needs a "clear, credible and coordinated exit strategy" from state support, but didn't suggest EU countries should start unwinding the €200 billion fiscal stimulus program they agreed to last December.
Optimism about the EU's economic prospects has grown steadily since France and Germany reported a 0.3% expansion in the second quarter of the year, the same source reported. The commission raised its forecast for Germany's economy, predicting a 5.1% contraction this year instead of the 5.4% it expected in May. France's economy is now predicted to contract 2.1% this year, up from the 3% predicted in May.
Poland, which is not part of the euro zone, would be one of few European countries to see its economy grow in 2009, the Commission said. It improved its 2009 growth outlook to 1.0 percent from -1.4 percent, according to Reuters. The Commission said the economies of Spain, Italy, Britain and the Netherlands would contract more than previously thought.
The EU executive said the euro zone's economy would grow by 0.2 percent and 0.1 percent in the third and fourth quarter respectively, compared with the previous three months, the same source gives information. In the first and second quarter, the economy contracted by 2.4 and 0.2 percent respectively.
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