On 4 May, the European Commission presented its spring forecasts 2009-2010. The Commission has estimated that the GDP in the European Union and in the eurozone is to fall by 4% in 2009. The recession is worse than expected. The Commission has foreseen, last January, that eurozone economy would contract by 1.9 percent and the EU economy by 1.8 percent. The EU Economic and Monetary Affairs Commissioner Joaquin Almunia said "The European economy is in the midst of its deepest and most widespread recession in the post-war era (…)” According to the Commission the EU’s economy will not start recovering until the second half of 2010.
According to the Commission’s forecast German’s economy is expected to contract by 5.4 per cent and Ireland by 9.0 per cent. Whereas Alistair Darling predicted that the UK economy will contract by 3.5 per cent in 2009 and will grow by 1.25 per cent in 2010 the European Commission is not so optimistic. According to the European Commission the UK’s economy will shrink by 3.8 per cent in 2009 and will grow just 0.1 per cent in 2010.
The Commission’s spring economic forecast also predicted that the unemployment rate across the 27 member states would reach 9.4% in 2009 and 9.9% in the eurozone and it is expected to rise, in 2010, to 11 per cent in the EU and 11.5 per cent in the eurozone. The Commission has estimated that around 8.5 million Europeans could lose their jobs in 2009 and 2010.
Unemployment in the UK is expected to hit 8.2 per cent in 2009 and 9.4 per cent in 2010. The biggest unemployment rates are expected in Ireland and Spain, Estonia, Latvia and Lithuania. Ireland’s unemployment rate is predicted to hit 13. 3 per cent in 2009 and 16 per cent in 2010. Spain unemployment is forecast to reach 17.3 percent in 2009 and 20.5 per cent in 2010.
According to the European Commission member states will be spending 5 per cent of the EU’s GDP on overall economic support and expansion in 2009 and 2010, which includes €270 billion on bank recapitalizations and €3.2 trillion on guarantees. Consequently, several member states’ budget deficits have shot up.
The Commission has foreseen the EU budget deficit to increase from 2.3 per cent to 6 per cent in 2009 and 7.25 per cent in 2010. Hence, the majority of member states are expected to have budget deficits breaching the three per cent deficit ceiling imposed by the Stability and Growth Pact.
The UK is among the countries expected to have the highest deficits. The Commission has foreseen the UK’s budget deficit to rise to 11.5 per cent in 2009 and 13.8 per cent in 2010.
