No good news

European economy sets the pace, inflation is on the increase and family consumption is in a gridlock. Financial turbulences which hit Western economies could extend to emerging economies, reaching India and China. Community institutions reiterated the cries of alarm launched over the past year.Heavy impact. “There is no good news”: Joaquín Almunia, EU Commissioner for Economic and Monetary Affairs, didn’t conceal his concern when September 10 he presented the latest figures on European economy. “Economic growth in EU-27 is estimated at 1.4%. While figures drop to 1.3% in the euro area, half a point less than April’s forecasts”. This is calculated on the basis of updated projections for France, Germany, Italy, the Netherlands, Poland, Spain and the United Kingdom, that together account for about 80% of the EU’s GDP. “The continuation of the turmoil in the financial markets one year on, the near doubling of energy prices over the same period and the correction in some housing markets” have had an impact on the economy. However, “the recent fall in oil and other commodity prices and the easing up in the euro exchange rate have provided some relief”.“Considering future generations”. In his remarks on the estimates, the Spanish Commissioner explained, “in this difficult and uncertain environment we must learn from past mistakes and keep a steady course of action”. “Moving ahead with Europe’s reform agenda” in acceding States “is crucial to continue creating jobs and to cope better with external shocks”. Despite the financial turmoil “we must help restore confidence in the financial markets, and preserve the improvements in public finances so as not to increase the burden for future generations, which will already face the challenge of an ageing population”. According to the Commission, inflation is expected to average 3.8% in the EU and 3.6% in the euro area. “this represents an upward revision – the Commissioner pointed out – although inflation could be at a turning point as the impact of past increases in energy and food prices gradually fades in the coming months”. While the brake on domestic demand persists. No country is safe. Based on the individual updates of the Seven Countries examined, GDP growth is expected to stall in Spain, Great Britain, Germany, Italy and France. According to the quarterly GDP forecast, growth is expected only in The Netherlands (0.3%) and Poland, (0.7%). While figures for the annual GDP forecast are as follows: Germany 1.8%, Spain 1.4, United Kingdom 1.1, France 1.0, Italy (ranking last) 0.1%. As compared to the global economic situation, “forecasts are increasingly unfavorable”, the Commssion declared. “One year after the outburst of the financial turmoil, the situation in the international financial system continues to be fragile”. Also to this regard, “business and consumer confidence have declined significantly”. Thus, while growth has remained robust so far in emerging economies, “a global economic slowdown is looming on the horizon”, which might affect Far East economies too.No to protectionism, working towards an upturn. The UE Executive lingers on the “risks” in commodity, energy and financial markets. However, other risks relate to the development of US economy. Disruption might be triggered by “new calls on protectionism and other trade-distorting measures”. On September 10, during a hearing at the European Parliament, European Central Bank President Jean-Claude Trichet, reiterated Commissioner Almunia’s statements: “the financial market turbulences that started in August 2007 are still under way. We cannot drop our guard and sit on velvet”. Trichet defended the ECB measures to counter inflation: “Price stability sets the basis for economic growth and employment”. In the same hearing at the European Parliament, Jean-Claude Juncker, President of the Euro Group, remarked: “I don’t see the risk of recession in the euro area. Indeed economic activity has undergone a decrease”; economic growth has reached “a standstill”. However, “I wouldn’t define it as a real and true recession. The situation ought to be recovered, “and this requires a joint effort”, he claimed.