Open

Coming up

Don't miss

Replay


LATEST SHOWS

DEBATE

Iraq's Christians - Nowhere to Run? (part 2)

Read more

DEBATE

Iraq's Christians - Nowhere to Run?

Read more

MEDIAWATCH

Towards a "Third Intifada"?

Read more

FOCUS

What solutions for California's overcrowded prisons?

Read more

MIDDLE EAST MATTERS

Gaza conflict: Palestinians mark sombre Eid

Read more

WEB NEWS

Celebrities in the Israel-Gaza crossfire

Read more

IN THE PAPERS

Israeli strike takes out Gaza power station

Read more

IN THE PAPERS

French newspaper apologises for Sarkozy story

Read more

BUSINESS DAILY

Last-ditch talks aim to avert Argentina default

Read more

  • Israel says it is 'days' from completing Gaza tunnel hunt

    Read more

  • Russia defiant as US, EU unveil 'phase three' sanctions

    Read more

  • Argentina fails to reach deal with holdout creditors

    Read more

  • Liberia shuts all schools as Ebola virus spreads

    Read more

  • US House votes to sue Obama for over-reaching his powers

    Read more

  • Suspect in Jewish Museum attack charged with 'terrorist' murder

    Read more

  • Women should not laugh in public, Turkey's deputy PM says

    Read more

  • Fourth female suicide bomber targets Nigerian city

    Read more

  • US rebounds to 4% growth in second quarter

    Read more

  • Video: Coping with rocket attacks in Israel’s Sderot

    Read more

  • Rats on the rampage at Louvre museum gardens

    Read more

  • France evacuates nationals, closes embassy in Libya

    Read more

  • 'Compelling' signs Kosovo leaders trafficked organs, prosecutor says

    Read more

  • Graphic: Ebola spreads across West Africa

    Read more

  • Video: How tourism is helping Rwanda’s gorillas, ex-poachers

    Read more

  • Islamists seize key Benghazi army base as fire rages on

    Read more

Europe

Eurozone recession to last another year

© AFP

Video by Nicholas RUSHWORTH

Text by News Wires

Latest update : 2013-02-22

The European Commission predicted on Friday that the eurozone economy will continue to shrink in 2013, despite previous forecasts that the recession would end this year. The Commission now forecasts a return to growth in 2014.

The euro zone will not return to growth until 2014, the European Commission said on Friday, reversing its prediction for an end to recession this year and blaming a lack of bank lending and record joblessness for delaying the recovery.

The 17-nation bloc’s economy, which generates nearly a fifth of global output, will shrink 0.3 percent in 2013, the Commission said, meaning the euro zone will remain in its second recession since 2009 for a year longer than originally foreseen.

The Commission, the EU executive, late last year forecast 0.1 percent growth in the euro zone’s economy for 2012, but now says tight lending conditions for companies and households, job cuts and frozen investment have delayed an expected recovery.

The Commission sees the euro zone economy growing 1.4 percent in 2014, with a figure of -0.6 percent for 2012.

“The improved financial market situation contrasts with the absence of credit growth and the weakness of the near-term outlook for economic activity,” said Marco Buti, the commission’s director-general for economic and monetary affairs. “The labour market... is a serious concern,” he said, in a preamble to the Commission’s latest forecasts.

The European Central Bank’s promise last year to do what it takes to defend its common currency has removed the risk of a break-up of the euro zone, and member countries’ borrowing costs have come down from unsustainable levels.

But the damage from the 2008/2009 global financial crisis and the ensuing euro zone debt crisis has been greater than expected on the real economy, with global demand for euro zone exports one of the few saviours in terms of generating growth.

Joblessness in the euro zone is set to peak at 12.2 percent, or more than 19 million people, in 2013, the Commission said, and both private and public consumption will not make any contribution to improving output, instead dragging on the economy.

The outlook raises the prospect of further interest rate cuts by the ECB to jump-start the economy by reducing the cost of lending for companies and families, although with banks reluctant to lend, any impact may be muted.

Consumer inflation is forecast by the Commission to be 1.8 percent for 2013, and with such pressures contained the ECB may feel more comfortable cutting rates to below the current 0.75 percent level.

“A cut in the main refinancing rate is not the most powerful measure the ECB could implement, but it is a step in the right direction,” investment bank JP Morgan wrote in a note this week.

The Commission’s overall view is a touch more pessimistic than that of the International Monetary Fund, which sees a 0.2 percent euro zone contraction this year.

The ECB previously cut its estimate of euro zone gross domestic product (GDP) for next year to between a fall of 0.9 percent and growth of just 0.3 percent.

“A weaker-than-expected final quarter of 2012 is set to shift the inception of the recovery towards mid-2013,” the Commission said.

(REUTERS)

Date created : 2013-02-22

  • EUROZONE

    Eurozone jobless rate hits new record

    Read more

  • EUROPE

    EU delays decision on ‘solidarity fund’ until mid-2014

    Read more

  • EUROPE

    EU nations agree to eurozone banking union

    Read more

COMMENT(S)