Monthly polls conducted by the Commission among entrepreneurs and consumers reveal their worst results since their inception in January 1985. The so-called economic sentiment indicator dropped to 63.5 points in the EU and to 67.1 in the eurozone recently. It was flying high at over 110 points in both areas in mid-2007, just before the financial crisis first reared its head in the US housing market.
The business climate indicator also recorded its lowest figures last December, signalling managers' negative expectations for eurozone production and reflecting growing stockpiles of unsold finished goods.
Eurostat, the Commission's statistical office, added further gloom to the picture by confirming that the eurozone economy had shrunk by -0.2% between July and September 2008. The euro area is now officially considered to be in recession because it has recorded negative growth for the second quarter in a row. The third quarter marked a -0.2% decline of the EU economy as a whole, too.
"We will release a new forecast on 19 January to provide a clearer picture of the economic prospects for the EU in 2009 and 2010. I cannot give any figures today as the work is not yet finalised. However, I can say that the outlook for the year ahead currently looks rather bleak," acknowledged Economic and Monetary Affairs Commissioner Joaquin Almunia in a speech delivered yesterday (8 January) in the Slovak capital Bratislava.
Meanwhile, unemployment across the euro zone hit 7.8% in November and 7.2% in the EU, reaching worrying peaks in Spain (13.4%), the Baltic countries and Hungary (over 8%), according to Eurostat. Almunia's spokesperson, Amelia Torres, regretted the bad situation in some EU countries but stressed that "at EU level, the unemployment rate is growing at a moderate pace".
To address the deepening crisis, the Commission again called upon member states to abide by their commitment made last December to put together an overall recovery plan worth 1.5% of EU GDP, of which 1.2% should come straight from national budgets. Almunia welcomed the fact that the measures announced at national level already amounted to 0.9% out of the 1.2% goal, "a remarkable amount" given the short period of time available and the fact that the crisis is ongoing, remarked the commissioner.
According to some critics, however, member states are not embarking fast enough on implementing the recovery plan adopted by EU leaders in December. In a letter to the European Voice, Party of European Socialists President Poul Nyrup Rasmussen noted that he sees no evidence that Europe is anywhere near achieving an investment stimulus worth 1.5% of GDP. "Recent figures I have seen suggest that the stimulus packages agreed so far by the larger member states amound to around 0.5% of GDP," he wrote. "Only Spain and the UK appear to be investing more than 1% to stimulate growth."
Analysts confirm that a helping hand may come from the European Central Bank (ECB), which could further cut interest rates at its meeting next Thursday (15 January), thus helping to oil Europe's struggling economic engines. A fresh reduction announced yesterday by the Bank of England, whose interest rates are now at their lowest-ever level (1.5%), offer another reason for the Frankfurt bank to reduce its own rates. Indeed, beyond the desire to avoid becoming less competitive than the British economy, the ECB may be inclined to slash rates amid falling inflation figures, which are now below the "close to 2%" target (EurActiv 07/01/09).
