EU sees recession, record dole queues right through this year

EU sees recession, record dole queues right through this year

BRUSSELS - Agence France-Presse
EU sees recession, record dole queues right through this year

European Economic and Monetary Affairs Commissioner Olli Rehn presents the EU Commission’s interim economic forecast during a news conference. REUTERS photo

The eurozone is staring at another full year of recession in 2013 with unemployment likely to surge above the 20-million mark with France in particular overshooting fiscal targets, the EU warned on Feb. 22.

Economic output across the 17-state currency area - home to about 340 million people and a global rival to the United States, Japan and emerging giants - is set to shrink by 0.3 percent this year after a 0.6-percent contraction last year, the European Commission said.

Millions more people are set to lose their jobs, with already record unemployment expected to rise markedly right into 2014.

National governments face a tricky balancing act getting their finances in order and meeting EU spending thresholds to avoid fines in what Brussels sees as an undesirable consequence that would further worsen Europe’s outlook.

France can expect some leeway from Brussels to avoid overly-tough austerity cuts such as those imposed on bailed-out Greece, analysts said, given the risk of aggravating the recession.

But the margin may not be so great for fear of storing up friction with Germany, the arch disciplined eurozone powerhouse, already set for 0.5-percent growth in this, a pivotal general election year.
“We must stay the course of reform and avoid any loss of momentum,” the EU’s economic affairs commissioner Olli Rehn said, arguing that the drag on growth and spike in joblessness was a natural consequence of “the ongoing rebalancing of the European economy.” The EU’s winter economic forecast said there would not be a return to growth for the debt -laden monetary union until 2014, when the expansion would measure 1.4- percent from the trough hit this year.

As a result, the eurozone unemployment rate would hit 12.2 percent for 2013 after 11.4 percent last year which left the number of people unemployed already at nearly 19 million.

French public deficit to deteriorate

Much of the attention was on France where the public deficit is set to be worse than expected in 2013 and 2014, coming in at 3.7 percent of output this year and 3.9 percent next year.

France, the eurozone’s second-biggest economy, had been due this year to get back within the EU’s deficit ceiling of 3 percent of output in 2013, though Brussels a few months ago had forecast a deficit of 3.5 percent of gross domestic product.

Germany already posted 0.7-percent growth last year, and is forecast to power back with a two-percent rise in 2014, nearly twice the French rate.

Across the full, 27-state EU, which also includes big players in Britain and Poland, growth is expected to be 0.1 percent this year and 1.6 percent next year.