EU finance ministers said a US recession could have grave implications for Europe’s economy but warned against overreacting, as stock exchanges around the world tumbled on Monday (21 January).
“The least we can say is that we live in interesting times. That’s about the only positive thing I can say,” Luxembourg Prime Minister and Eurogroup President Jean-Claude Juncker said on 21 January 2008, responding to the financial turmoil that shook European and Asian markets amid fears of a US recession.
“The economic situation and financial markets are highly volatile and uncertain, a good deal more uncertain than usual […] If there is a real slowdown in growth in the US, obviously that would be felt in terms of growth the eurozone,” Juncker said on Monday after a meeting with EU finance ministers in Brussels.
Fears of a US recession have caused stock exchanges all over the world to tumble, with markets suffering the worst one-day fall since 9/11. The British FTSE-100 slid by 5.5% to 5,578.20, the German Xetra Dax fell by 7.2% to 6,790.19 and France’s CAC-40 dropped by 6.8% to 4,744.15. Stock exchanges in Japan, New Zealand and Australia continued on a downward slope, increasing fears of a snow-ball effect.
However, Juncker cautioned against “excessive pessimism” and underlined that the economic situation in the US was in no way comparable to Europe’s. “Our fundamentals are sound, restructuring is advancing well, levels of unemployment are continuing to be cut down. We feel comfortable with our economic situation at the moment and we feel that consumers in Europe have no reason to lose confidence.”
Nevertheless, the EU will have to adjust its expected growth rates downwards. Economic and Monetary Affairs Commissioner Joaquin Almunia said that growth forecasts were much better in Europe than in the US but admitted that they “won’t be achieved”. However, he insisted that “they won’t be far from being achieved”.