EU executive says euro zone economy will grow next year
November 4, 2009
By Emma Ross-Thomas Madrid
The euro zone economy would return to growth next year, the European Commission said yesterday, raising its forecasts even as budget deficits and unemployment swell to the highest levels since at least 1995.
The economy of the 16 countries sharing the euro would expand 0.7 percent in 2010 and 1.5 percent in 2011, after contracting 4 percent this year, the EU's executive said in an economic forecast. It had previously forecast a 0.1 percent contraction in 2010.
The region's average budget deficit would widen to 6.9 percent of economic output next year and unemployment would reach 10.9 percent in 2011, the most since at least 1995.
The commission's growth forecasts are more optimistic than predictions from the International Monetary Fund on October 1 that the region would grow 0.3 percent next year after a 4.2 percent contraction in 2009. The IMF forecast an unemployment rate of 11.7 percent for next year.
European governments should start reining in budget deficits in 2011, by which time the recovery should be "sustained", said EU monetary affairs commissioner Joaquin Almunia. "In 2011, I think everybody should start the consolidation," he said. "Major challenges persist for the near term; we are optimistic but we see in 2010 and 2011 only a gradual recovery."
Inflation next year will remain below the 2 percent ceiling set by the ECB. - Bloomberg
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