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EU stuck in deep rebalancing

November 7, 2012

The European Commission has unveiled its closely watched autumn forecast for the economic development of the 27-member bloc. Good news is few and far between as the debt crisis lingers on.

https://p.dw.com/p/16eF5
Two workers checking a Rolls Royce engine
Image: picture-alliance/dpa

On Wednesday, the EU's executive released its autumn forecast looking at the prospects of economic growth in the bloc. It painted a rather bleak picture of developments in the months ahead.

The European Commission anounced that it expects the economies in the 17-member eurozone to contract by 0.4 percent this year, before recovering only slightly by 0.1 percent in 2013. In the wider 27-member EU, gross domestic product (GDP) would drop by 0.4 percent this year to be followed by meager 0.3 percent growth in 2013.

"Europe is going through a difficult process of macroeconomic rebalancing which will still last for some time," Economy Commissioner Olli Rehn said in Brussels, adding that unemployment in the EU would reach a new peak next year, at a little below 11 percent.

The Commission also warned that a number of countries would not be able to live up to their own budget consolidation goals. It predicted that France would only be able to reduce public deficit to 3.5 percent this year instead of the 3 percent targeted. Spain for its part would end the year logging an 8.0 percent deficit instead of the 6.3 percent promised earlier.

Germany strong by comparison

In a separate report by a panel of advisors to the government in Berlin, German economic pundits on Wednesday warned that there would be no growth in the country in the final quarter, but added that gross domestic product throughout 2012 would expand by 0.8 percent, followed by another 0.8 percent next year.

German economic experts issue report

The experts said that inflation in Germany would hover around 2 percent and employment would remain robust. The panel expected only a marginal rise in the number of jobless people, but stated that number would not exceed the psychologically important threshold of 3 million next year.

The German group of advisers explicitly criticized the coalition government of Chancellor Angela Merkel for a string of recent social reforms that in their view run counter to the country's budget-consolidation targets. Among other things, last weeked the government greenlit an allowance for parents caring for their kids at home and scrapped a quarterly fee for doctor visits.

"Those measure are taking us in the wrong direction," the panel wrote in a statement.

hg/mkg (AFP, dpa, dapd)