UE:RECESION

January 19, 2009

Long and Deep Recession Forecast in Europe 

By THE ASSOCIATED PRESS

(Farid matuk, lista macroperu)

BRUSSELS, Belgium (AP) -- The European Union said Monday it is facing a ''deep and protracted recession'' with government spending the only source of growth this year.

The 16 nations that use the euro will shrink by 1.9 percent in 2009, 

with the entire EU contracting 1.8 percent, the European Commission 

forecasts.

It says 3.5 million jobs will disappear in the EU in the year ahead 

as business and household spending falls and banks tighten lending.

Government demand and investment will be the only source of growth -- 

but that carries a heavy price tag. Government deficits will hit the 

highest level in 15 years as they borrow heavily to stoke growth.

It says the economy would be faring much worse without current EU 

nations' plans to boost growth by spending 1 percent of gross 

domestic product this year, which should help the economy expand by 

an extra 0.75 percent.

The EU executive said the downswing will be particularly marked in 

Britain and more protracted in Spain.

It warned that the outlook was still exceptionally uncertain, 

describing the economic crisis as the worst faced by the world since 

the second world war.

It predicts a moderate recovery in 2010 when the EU could grow 0.5 

percent. The first green shoots could come in the second half of 2009 

when the global economy may pick up.

But the EU warned that ''the main issue is whether the recovery will 

be a lasting one.''

In Europe, it warned that it could not rule out that ''very weak 

economic sentiment may continue for some time as concerns about a 

long and deep recession spread, particularly with unemployment now on 

the rise.''

Falling exports will hit Germany hard. The Europe's largest economy 

is also the world's biggest exporter and will likely shrink 2.3 

percent this year, it said.

It says the British economy will shrink 2.8 percent this year, while 

France will contract by 1.8 percent.