The Commission has lowered this year's growth estimate for the EU as a whole to 1.4% (1.3% for the 15-member eurozone) compared to the 2% and 1.7% forecast in April. Germany is the main country of concern, with its economy, the biggest in Europe, projected to decline for the second consecutive quarter (-0.5% in the second quarter and -0.2% in the third). It is expected to recover only slightly in the coming months.
The same is true for the UK and Spain, whereas France and Italy are projected to do slightly better. But even they are not performing strongly enough to banish "looming fears of recession" highlighted by Luxembourg Finance Minister Jean-Claude Juncker, who chairs the regular meetings of his eurozone counterparts.
"The economic slowdown will be quite pronounced and longer than initially foreseen," Juncker told MEPs yesterday.
Presenting the latest figures, Joaquin Almunia, the economics and monetary affairs commissioner, described the environment as "difficult and uncertain," saying the ongoing turmoil in financial markets and "the near doubling of energy prices over the same period" certainly "had an impact on the economy".
Speaking at the Parliament's Economics Committee, Jean-Claude Trichet, the president of the European Central Bank, sounded more optimistic, saying "the current episode of weak economic growth is expected to be followed by a gradual recovery".
He seemed more concerned by rising wage pressures in countries such as Germany, where the largest trade union is calling for a 7 to 8% pay rise, urging employers and governments to resist such demands to avoid fuelling further inflationary pressure.
The inflation rate in the eurozone decelerated slightly to 3.8% in August after hitting a record high in July, according to the Commission. The evolution of oil and food prices in the coming months would be a crucial factor in eurozone economies' ability to cope with the economic downturn, Trichet said.
Almunia called for the speedy implementation of the road map to help restore stability and confidence in the financial markets, which EU finance ministers agreed to last October (EurActiv 10/10/07) and to continue the consolidation of public finances so as not to increase the burden for future generations.
