According to a new forecast by the European Commission, the economies of the 16 eurozone countries will shrink by 1.9% this year amid surging unemployment and government deficits. The jobless rate is expected to top 10% by 2010.
AFP - The economy of the 16 nations using the euro will contract 1.9 percent this year as unemployment surges and government deficits explode in the midst of a severe recession, the European Commission forecast on Monday.
The forecast marked a dramatic downward revision from the commission's last estimate in November, when it predicted that eurozone economy would eke out growth of 0.1 percent.
The estimate also reveals that the eurozone has rapidly plunged into a deep recession after growing an estimated 0.9 percent in 2008.
The commission said the eurozone would not see the beginning of a recovery before mid-2009 and that the eurozone economy would then manage to grow a meagre 0.5 percent in 2010.
It forecast that the 27-nation EU economy would fare only marginally better, contracting 1.8 percent this year before achieving growth next year of 0.5 percent.
At the same time, unemployment will climb to levels not seen in Europe for over decade as joblessness becomes once again a major headache for workers and politicians.
The commission forecast that the eurozone jobless rate due to rise from 7.5 percent in 2008 to 9.3 percent this year and hit 10.2 percent in 2010 -- over the 10 percent mark for the first time since 1998.
With their economies in a tailspin, European governments pledged in December to pump a combined 200 billion euros (265 billion dollars) into a Europe-wide economic stimulus package.
However, some governments, including that of economic powerhouse Germany, have already come out with plans since then for even bigger stimulus plans or are considering doing so.
As governments plow billions into trying to revive their economies and bail out their banks, public deficits will swell, balloning from 1.7 percent of output in 2008 to 4.0 percent in 2009 and 4.4 percent in 2010.
However, the commission warned that some countries would see much more dramatic downturns than others, with the financial crisis and housing market crashes taking a heavy toll on the Irish and Spanish economies in particular.
Spain will see its unemployment rate surge from 11.3 percent in 2008 to 16.1 percent in 2009 and to a stunning 18.7 percent in 2010 while Ireland will see its deficit explode from 6.3 percent in 2008 to 11.0 percent in 2009 and 13.0 percent in 2010.
Date created : 2009-01-19