European Commission: euro zone economy is at a “turning point”
According to a forecast from the European Commission, the euro zone will return to positive growth by the end of 2009, lifting the 16 countries that use the euro out of recession.
The commission is forecasting growth of 0.2% for the July to September period but warns that the recovery might not be sustainable in 2010 as Government stimulus packages come to an end.
The commission comments: “Rising unemployment could weigh on consumption, while ample spare capacity and an anaemic credit supply might restrain investment.”
Furthermore: “The strength of the recovery could surprise on the upside in the near term, but its sustainability is yet to be tested.”
However, the Commission did say that the euro zone economy “appears to be at a turning point.”
The latest forecast comes as Germany and France both experienced positive growth in the second quarter and have exited recession.
In the meantime, the Commission also forecast the UK economy, which is outside the euro zone, would expand by 0.2% during the third quarter, also exiting recession.
In other news today, it was revealed that euro zone industrial production fell by 0.3% in July compared with June.
Earlier this month, the European Central Bank (ECB) elected to keep interest rates unchanged at 1%.
The last time the ECB cut rates was in May and prior to that, rates were cut seven times since October 2008 when rates stood at 4.25%.
Finally, unemployment levels across the euro zone is at a 10-year high in July. The latest official figures show that the number of people unemployed across the region reached just over 15 million people in July and puts the unemployment rate at 9.5% – the highest rate in over a decade.