EU economy hit hard by global downturn, gloomy outlook

EU economy hit hard by global downturn

The Commission expects EU and eurozone economies to shrink almost 2% in 2009 before recovering moderately in 2010. (January 19)

Commission cuts economic growth forecast as scale of financial crisis and ensuing global downturn become apparent.
The Commission estimates that economic growth fell to about 1% in 2008 in both the EU and the eurozone (down from just below 3% in 2007). The latest forecast projects that real GDP will contract by almost 2% in both regions in 2009, before growing again by about 0.5% in 2010. These figures are lower than the autumn forecast.
With the EU economy expected to shed some 3.5m jobs this year, unemployment is set to rise. The rate is forecast to reach 8¾% in the EU in 2009 (9¼% in the eurozone), with a further increase in 2010.
Public finances will be hit, too. The headline deficit for EU countries – a raw measure of budget shortfalls – is expected to more than double this year, from 2% of GDP in 2008 to 4½ % in 2009 (from 1¾ % to 4% in the eurozone). As a result, several EU countries are projected to breach or stay over the EU deficit cap of 3% of GDP. A further worsening of the budgetary outlook is expected for 2010.