EU paints gloomy picture of euro-area growth outlook

November 5, 2013 in News by The Manimal

Source: Wake Up From Your Slumber

The European Union trimmed its forecast for euro-area growth next year as the economy struggles to gain momentum with the debt crisis dragging into a fifth year and unemployment at a record.

Gross domestic product in the 17-nation currency bloc will rise by 1.1 per cent in 2014, less than the 1.2 per cent forecast in May, the Brussels-based commission said yesterday.

Unemployment, now at its highest rate since the euro was introduced, will be 12.2 per cent in 2014, higher than the 12.1 per cent predicted six months ago.

“The fiscal consolidation and structural reforms undertaken in Europe have created the basis for recovery,” EU economic and monetary affairs commissioner Olli Rehn said in a statement. But it is too early to declare victory. Unemployment remains at unacceptably high levels. That’s why we must continue working to modernise the European economy.”

The gloomier outlook deals a blow to the growing sense of optimism that the euro area is emerging from the sovereign-debt crisis and may make it more difficult for European governments to convince financial markets that they are tackling the turmoil through deficit reduction and structural reforms.

While the commission’s gauge of economic confidence is at a two-year high, services and manufacturing output unexpectedly slowed in October and unemployment is at a record 12.2 per cent.