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No sign of economic turnaround: Juncker

No sign of economic turnaround: Juncker

There are no indications of a turnaround in the euro zone's deep recession and downside risks to growth are materializing, top officials from the 16-country currency bloc said on Monday.
"We have seen a considerable deterioration in the economic situation since (our) February meeting and no ... indicator gives reason to believe the situation is turning around," the chairman of euro zone finance ministers, Jean-Claude Juncker, said.
"All forecasts available are extremely gloomy. This is a deep recession, deeper than at the beginning of the 1990s," he told a news conference after a monthly meeting of ministers from the countries sharing the single currency.
The European Commission forecast on Jan. 19 that the euro zone economy would shrink 1.9 percent this year. The European Central Bank, however, forecast last Thursday the contraction could be between 2.2 percent and 3.2 percent.
The bank cut interest rates by 50 basis points to 1.5 percent, the lowest level ever, to support sagging demand amid waning inflationary pressure.
"Since the Jan. 19 forecasts, downside risks have increased," EU Economic and Monetary Affairs Commissioner Joaquin Almunia told the news conference.
"There are problems on one hand concerning the situation in credit markets with very low flows of credit and tightening of credit conditions, and on the other hand with weakness of the real economy," he said.
"In other areas, external demand has weakened so the recovery will take longer than we expected a few months ago."
Almunia said he now believed a gradual recovery would take place only in 2010 rather than late 2009 as forecast earlier.
But the euro zone finance ministers rejected calls from the United States to boost the fiscal stimulus packages already announced in the 27-nation European Union, which currently amount to between 3 and 4 percent of EU gross domestic product.
"Europe and the Eurogroup have done what they needed to do ... we take the view that we don't need to make a further effort for the moment. We are going to see the effect of the recovery package. These are effects that will only come to light gradually," Juncker said.
"It will be possible to gauge the effect during 2010, we mustn't pile deficit upon deficit," he said.
He said the ministers agreed they needed a strategy to bring public finances back in order after the extra recession-related spending boosted budget deficits in many EU countries to above the bloc's ceiling of 3 percent of GDP.


Updated : 2020-12-02 22:09 GMT+08:00