Europe's economy is still
reeling and unemployment could remain high for years despite the
progress made in solving the debt crisis, the European Union warned
Wednesday, as it downgraded next year's forecasts for the 27-country
bloc.
The commission had previously expected the 17 countries that use the euro to find its footing next year, with 1 percent growth. Now it predicts only a 0.1 percent uptick. The report also suggests that unemployment won't start falling until 2014 -- and then only slightly. "Europe is going through a difficult process of macroeconomic rebalancing and adjustment, which will last for some time still," Olli Rehn, the EU's economic and monetary affairs commissioner, told reporters. "Market stress has been reduced but there is certainly no room for complacency."
The eurozone has made progress this year toward resolving its debt crisis, which has been dragging down economies throughout the EU and beyond. Countries that use the euro have slashed spending and promised to keep their deficits in check; they've vowed to better protect their banks by improving how they're regulated and supervised; and the European Central Bank has put in place a plan to help countries struggling with high borrowing costs, the hallmark of the crisis and the reason some have sought bailouts.
This commission's predictions for this year reflect that grim reality. It expects the EU's economy to contract by 0.3 percent, rather than remaining flat as it forecast in the spring. It also predicts that the eurozone GDP will fall 0.4 percent, against a previous expectation of a 0.3 percent drop.
Official third-quarter GDP figures -- which will show whether the eurozone has entered recession as economists suspect it has -- are due to be released on Nov. 15. A recession is defined as two quarters in a row with negative growth.
The commission's report also confirms that the crisis is not sparing even Germany, Europe's largest economy and the traditional motor for growth.
It predicted that Germany would eke out just 0.8 percent growth in 2012, compared with its earlier forecast of 1.7 percent. ECB President Mario Draghi warned Wednesday that "the latest data suggest that these developments are now starting to affect" the German economy.
In a speech given in Frankfurt, Draghi called on governments to back up the ECB's plans to help countries with their borrowing costs by cutting debt and improving growth through cutting excessive red tape.
"Across the whole euro area, governments are making determined efforts to reverse economic imbalances," he said. "They are implementing reforms to redress the misguided policies of the past and to create sustainable long-term growth. It is a difficult road and there is still a long way to go. But the early signs are encouraging."
The commission had previously expected the 17 countries that use the euro to find its footing next year, with 1 percent growth. Now it predicts only a 0.1 percent uptick. The report also suggests that unemployment won't start falling until 2014 -- and then only slightly. "Europe is going through a difficult process of macroeconomic rebalancing and adjustment, which will last for some time still," Olli Rehn, the EU's economic and monetary affairs commissioner, told reporters. "Market stress has been reduced but there is certainly no room for complacency."
The eurozone has made progress this year toward resolving its debt crisis, which has been dragging down economies throughout the EU and beyond. Countries that use the euro have slashed spending and promised to keep their deficits in check; they've vowed to better protect their banks by improving how they're regulated and supervised; and the European Central Bank has put in place a plan to help countries struggling with high borrowing costs, the hallmark of the crisis and the reason some have sought bailouts.
This commission's predictions for this year reflect that grim reality. It expects the EU's economy to contract by 0.3 percent, rather than remaining flat as it forecast in the spring. It also predicts that the eurozone GDP will fall 0.4 percent, against a previous expectation of a 0.3 percent drop.
Official third-quarter GDP figures -- which will show whether the eurozone has entered recession as economists suspect it has -- are due to be released on Nov. 15. A recession is defined as two quarters in a row with negative growth.
The commission's report also confirms that the crisis is not sparing even Germany, Europe's largest economy and the traditional motor for growth.
It predicted that Germany would eke out just 0.8 percent growth in 2012, compared with its earlier forecast of 1.7 percent. ECB President Mario Draghi warned Wednesday that "the latest data suggest that these developments are now starting to affect" the German economy.
In a speech given in Frankfurt, Draghi called on governments to back up the ECB's plans to help countries with their borrowing costs by cutting debt and improving growth through cutting excessive red tape.
"Across the whole euro area, governments are making determined efforts to reverse economic imbalances," he said. "They are implementing reforms to redress the misguided policies of the past and to create sustainable long-term growth. It is a difficult road and there is still a long way to go. But the early signs are encouraging."
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