The European Commission has slashed its growth forecasts for the Eurozone and now thinks that the single currency region will not return to growth this year despite saying for months that the worst is over.
In its Winter Forecasts, the European Commission predicted that the Eurozone’s GDP would shrink by 0.3% during 2013, and not achieve the 0.1% growth figure it had pencilled in previously. The EC warned that Europe’s unemployment crisis was a desperately serious problem.
Marco Buti, the EC’s director general for Economic and Financial Affairs, warns in today’s Winter Forecasts that Europe’s unemployment crisis is deepening.
Buti wrote:
“Employment is forecast to shrink further for some quarters, and unemployment remains unacceptably high in the EU as whole and even more so in the Member States facing the largest adjustment needs.
This has grave social consequences and will, if unemployment becomes structurally entrenched, also weigh on growth perspectives going forward.”
The most recent data shows that the Eurozone unemployment rate is 11.7%.
The Commission also warned that Italy would shrink by 1% in 2013, not the 0.5% contraction it had expected. And for Cyprus, it now sees a 3.5% plunge in GDP, down from a 1.7% drop before.
Germany is expected to grow by just 0.5% this year, not 0.8%. France meanwhile will only manage a measly 0.1% growth, not the predicted 0.4%.
The Euro saw a rebound earlier on Friday after the latest German business confidence index jumped for a fourth consecutive month. The monthly IFO survey rose to 107.4 for February up from the 104.3 posted in January. Today’s EC forecast, however, could weigh down the Euro and limit the gains it made earlier in the session.
Current Euro exchange rates
As of 10:30 am
The Euro to Pound Sterling exchange rate is currently trading in the region of 0.8651
The Euro to US Dollar exchange rate is currently trading in the region of 1.3212
The Euro to Australian Dollar exchange rate is currently trading in the region of 1.2807
The Euro to New Zealand Dollar exchange rate is currently trading in the region of 1.5771