Euro economies warned of recession

11 September 2008

Several of Europe's largest economies might experience negative growth before the end of the year, new analysis released today shows.

According to the European Commission, the UK, Germany and Spain will all see third and fourth quarter GDP contractions.

The research also cut its forecast for 2008 eurozone growth by 0.4 per cent, so that it now stands at 1.3 per cent.

Previously, an Organisation for Economic Co-operation and Development report had suggested that, while the UK would indeed slip into recession over the months to come, the other economies would experience merely static growth.

Eurozone economies are particularly vulnerable to negative growth, as the European Central Bank has refused to cut interest rates since the onset of the credit crunch.

This is partly due to high inflation rates across the continent.

"In a context of an unusually high degree of uncertainty, the external headwinds not only had a direct adverse impact on inflation and capital costs, but also an indirect one on confidence," economic and monetary affairs commissioner Joaquin Almunia told the BBC.

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