EU sees Germany headed for recession
Published on: 10 Sep 2008 11:14 CET
The European Union's executive arm estimated that the three countries would see two consecutive quarters of economic contraction over the course of this year, which is how economists define a recession.
But the commission forecast the 15-nation euro zone would avoid recession by the narrowest of margins. Germany, the world’s third-largest economy, makes up nearly a third of the euro zone’s economic output.
After contracting 0.5 percent in the second three months of the year, the German economy would see activity retreat a further 0.2 percent in the third quarter, according to the Commission.
Despite the warning that the German economy would dip into recession, the EU still stuck to its forecast of 1.8 percent growth in 2008.
Economic and Monetary Affairs Commissioner Joaquín Almunia called on all EU states to continue with reforms despite the “difficult and uncertain situation” at present.
“The continuing turbulence on the financial markets that started a year ago, the energy prices that have almost doubled over the same period, and the correction on certain real estate markets have had an impact on the economy,” Almunia said in Brussels on Wednesday.
He said sinking oil prices and the weakening of the euro have eased the pressure, but that “pushing ahead with Europe’s reform agenda is crucial for creating jobs and better managing external shocks.”