Europe’s economic recovery under way, uncertainty remains

05 May 2010 14:11  [Source: ICIS news]

LONDON (ICIS news)--An economic recovery in Europe is under way following the deepest recession in its history, the European Commission said on Wednesday.

In its spring forecast, the Commission said the EU economy was set to grow by 1% in 2010 and 1.75% in 2011, an upward revision of 0.25 percentage points for this year from the Commission's autumn forecast.

"The improved outlook for economic growth this year is good news for Europe,” said EU commissioner for economic and monetary affairs, Olli Rehn.

“We must now ensure that growth will not be derailed by risks related to financial stability. Sustainable growth calls for determined fiscal consolidation efforts and reforms that enhance productivity and employment," he added.

However, the Commission stated that uncertainty was still high and weak domestic demand has continued to restrain further recovery, adding that budget deficit would stay at about 10% of gross domestic product for this year and next.

“As the economy is emerging from a recession accompanied by a financial crisis, the recovery crucially relies on the soundness of financial markets, which has yet to be solidly re-established,” it said.

Marco Buti, director general of economic and financial affairs, said the EU would have to “grapple” with legacy of the global financial crisis and the economy would “continue to face headwinds from several directions.”

He added that while clearly gaining strength, the banking sector remained fragile and further significant losses could not be excluded.

“On the other hand, help has come in the form of stronger-than-expected external demand, particularly from emerging economies, which has boosted EU exports. The outlook for global trade in 2010 is much more favourable than it was last autumn,” Buti said.

Speaking on Greece's debt crisis, the Commission calmed fears that a similar fiscal disaster would spread to other European countries, such as Spain and Portugal.

“I want to underline that Greece is a unique and particular case in the EU,” Rehn said, adding that the country had cheated with its statistics for years.

“The euro area is taking care of the Greek case and I am confident we will succeed in turning things around,” he said.

The Commission said Greece's economy would contract 3% this year.

($1 = €0.77)

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By: Franco Capaldo
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