A dark year

A further slowdown of the Gross National Product, a worsening in public accounts, along with surging unemployment: according to the “interim” forecasts (covering the period between Autumn and Spring), presented January 19 to the EU Commission, 2009 will be recorded as the worse current recession period, confiding in modest recovery starting next year.No hedge is possible. In presenting the economic forecasts, the Commissioner for Monetary Affairs Joaquin Almunia didn’t conceal his concerns, and indicated the path of concerted intervention to revive productive sectors while reaffirming the need to closely monitor public accounts. According to the Executive forecasts, the Gross Domestic Product of the European Union is expected to fall to -1,8% in 2009 (it was +0,9% in the past year), and rise to +0,5% in 2010 while GDP in the euro zone this year amounts to -1,9%, figures are expected to rise by +0,4% next year. Commission experts maintain that the financial crisis and real economy slowdown are “evident in the strong contraction of international trade and manufacturing production”: no sector can boast inflation hedge, Almunia pointed out. Furthermore, “the serious downturn in the economy will have repercussions over employment and public finance”. GDP slow-down. The Commission’s forecasts refer to all EU Member States. Individually, the States have problems as relates to GDP, risk of default on debt, deficit and employment. As relates to the Gross Domestic Product, 2009 forecasts in the euro zone ascribe -2.3% to Germany, -1.8 to France, -2,0 to Italy and Spain; while Ireland is at -5%. Figures range below zero also for Belgium, Luxembourg, The Netherlands, Austria, Portugal and Finland. Other Countries outside the euro-zone record negative GDPs such as the United Kingdom with -2,8%. But the worst situation is expected in Latvia, Lithuania and Estonia. Positive figures relate to Poland (2%), Slovakia (2.7), Romania and Bulgaria (1.8). As concerns the gross debt of Public Administration, Italy tops the negative chart with 105.7% in 2008 that is expected to reach 109.3% in 2009. Surging indebtedness affects also Germany, France, the United Kingdom and many small countries.Low inflation, rising unemployment. “Measures aimed at stabilizing the financial market, the easing of monetary policies and the economic recovery plans will enable us to put a floor under the deterioration of the economy and create the conditions enabling gradual recovery in the second part of 2009”, Almunia remarked. “We ought to ensure the measures work effectively”, to relaunch enterprises, stimulate investments and private consumption. Furthermore, in order to boost family and financial operators’ confidence “it is crucial that Member States explicitly commit that they will reverse the deterioration of public finances as soon as we return to normal economic times”. The only positive figure is inflation slowdown which, in EU27, is expected to pass from 3.7% in 2008 to 1.2% this year. According to the forecasts, unemployment will raise from 7% in the past year to 8.7% in 2009 up to 9.5% of 2010. Deficit beyond Maastricht. National deficit data reveal that among the 16 Countries that adopt the single currency, only few will remain within Maastricht parameters. The most evident case regards Ireland, deeply affected by the financial crisis with a -11% deficit/GDP ratio this year and -13 in the forthcoming twelve months. For the year 2009 Germany records -2,9% (-4,2 in 2010), France -5,4%, Italy -3,8%, Spain -6,2%. Commissioner Almunia pointed out that the Executive will need to give priority to the most difficult situations: February 18 he will send to the Finance Ministries (Ecofin) the reports on the single States. However, despite “headline deficit”, provisions will be suspended in order not place an excessively heavy burden on fragile economic systems. Uncertainty prevails. As relates to the international scenario, the Commission underwent a strong slow-down in last trimester of 2008, while “gradual world financial upswing” is expected in the second half of 2009,” “thanks to financial market recovery and in to policies” currently implemented by the U.S. and the E.U. A warning comes from Brussels: “This forecast is again surrounded by exceptional uncertainty as the world economy faces its worst crisis since World War II”.