Gloomy forecasts for EU as crisis hits real economy[fr][de] 

"The Commission's autumn forecasts show that EU economies are strongly affected by the financial crisis, which is aggravating housing-market correction in several economies at a time when external demand is fading rapidly," read a Commission statement . 

"Aggravation" of housing bubbles can be considered as a reference to Ireland and Spain, whose economies are expected to enter into recession. According to the EU executive, the Irish economy will decline by 1.6% in 2008 and 0.9% in 2009. For Spain, the recession will be limited to -0.2% in 2009, while in 2010, both countries should begin to grow again alongside the rest of Europe.

Germany and France, the engines of the euro zone, will both see zero growth in 2009, as will Italy, according to the Commission's predictions. The recovery should start in 2010, with growth of 1% in Germany, 0.8% in France and 0.6% in Italy.

Outside the euro zone, the EU exeuctive predicts that the UK economy will shrink by 1% in 2009. The Baltic countries will also be hit hard: Latvia's GDP will fall by 0.8% in 2008 and 2.7% in 2009; the Estonian economy will fall by 1.3% in 2008 and 1.2% in 2009, while Lithuania's economy will come to a standstill (0%) in 2009.

Joaquín Almunia, the EU's economic and monetary affairs commissioner, said: "We need a coordinated action at the EU level to support the economy similar to what we have done for the financial sector. The Commission last week set out a framework for recovery that aims to boost investment, sustain employment and demand. We are looking forward to hearing member states' views, especially for a joint approach at the EU level" (EurActiv 30/10/08).

The Commission foresees a drop in investment and consumption, with a consequent increase in unemployment. In the euro zone, unemployment is expected to hit 8.4% in 2009 and 8.7% in 2010, up from the 7.5% recorded in 2007. For the EU as a whole, the Commission expects unemployment to peak at 8.1% in 2010.

The only positive note of the worst Commission forecast for years is the expected rapid fall in inflation, which should return close to the target of 2% in 2009 (2.2% in the euro zone, 2.4% in the EU) and fall again in 2010 to 2.1% in the euro zone and 2.2% in the EU. Moreover, as a consequence of the recent depreciation of the euro, eurozone imports are set to slow more than exports, which will "contribute positively to GDP".