Fessing up to reality, the European Union says euro-zone jobless to hit postwar record.
Deepening the economic gloom in Europe, the European Union admitted Monday that its previous forecasts were way off the mark. It now predicts “a deep and widespread recession” across the continent and says unemployment among nations using the euro currency will rise to a postwar record of 11.5 percent in 2010.
The new forecasts expect the economies of the 27-nation EU and the 16-nation euro-zone to shrink by 4 percent this year — more than double a January estimate.
The EU now reckons that Germany will contract by a massive 5.4 percent this year as global demand dries up for the high-value goods such as cars and machinery that the country makes and exports. In January, the EU thought Germany would only shrink 2.3 percent this year.
The European Commission said more than 26 million people in the EU will be out of work next year as a contracting economy sheds an extra 8.5 million jobs — putting pressure on governments and central bankers to do more to alleviate the downturn.
Just four months ago, the EU thought the EU economy would only contract 1.8 percent and the euro-zone only sink 1.9 percent this year.
Almunia [the EU’s top economy official] said quarterly growth is unlikely to emerge until 2010, and that even then both the EU and the euro-zone will likely shrink 0.1 percent over the whole year — provided the banking sector recovers and world trade turns around.
That last paragraph is interesting. The EU is now expecting a contraction for two straight years, even IF the banking sector recovers and world trade turns around. This is in sharp contrast to never ending the talk of “green shoots” in the US with many US economists predicting the recession will end in the second half of 2009.
One of those forecasts is going to be wrong.
Mike “Mish” Shedlock
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