Newspaper article International Herald Tribune

Anemic Recovery Seen in Europe Next Year

Newspaper article International Herald Tribune

Anemic Recovery Seen in Europe Next Year

Article excerpt

Unemployment will remain at "very high" levels, according to a gloomy set of forecasts issued by the European Commission.

The European Union will experience only a very weak economic recovery next year and unemployment will remain at "very high" levels, according to a gloomy set of forecasts issued Wednesday by the European Commission.

The forecasts, combined with European business's general disappointment about the outcome of the U.S. presidential election, helped send stocks lower on the Continent and in London on Wednesday -- a downward drift that carried over to Wall Street through midday there.

Gross domestic product will shrink 0.3 percent for the 27 members of the European Union as a whole this year, and 0.4 percent for the 17 members in the euro zone, the commission predicted. Growth in 2013 will be 0.4 percent across the Union and 0.1 percent in the euro area, it said.

The figures represent a significant downgrade of expectations. In its spring economic forecast, the commission had predicted G.D.P. in the euro zone would shrink 0.3 percent this year before rebounding to growth of 1 percent next year. The spring forecast had also said growth in the Union as a whole would remain flat this year but then rise to 1.3 percent in 2013.

Now, the commission predicts Europe will have to wait more than a year to generate "a stronger and more evenly distributed expansion." It forecast growth for 2014 of 1.6 percent across the Union and of 1.4 percent in the euro area.

Olli Rehn, the economic and monetary affairs commissioner, sought to put a positive spin on the figures by saying they showed "a gradual improvement in Europe's growth outlook from early next year." He also highlighted that "market stress has been reduced" since European leaders began to overhaul the institutions running the euro and since the European Central Bank pledged to shore up vulnerable economies.

But Mr. Rehn acknowledged that Europe was going through a "difficult process of macroeconomic rebalancing, which will still last for some time. …

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