Brussels, Sep 14 (DPA) European Union (EU) governments should be braced for more job losses, officials in Brussels said Monday as they published forecasts pointing to a slow recovery in the 27-member bloc.
According to the European Commission’s latest forecasts, EU gross domestic product (GDP) was expected to grow by 0.2 percent in the third quarter and by 0.1 percent in the fourth quarter, after contracting sharply during the first half of the year.
Overall, EU GDP for the year was expected to shrink by 4 percent – in line with previous estimates.
“Unfortunately, unemployment levels will continue to go up, and employment levels will continue to decrease, since the negative impact of the crisis on the labour market has a lag of two or three quarters,” said Joaquin Almunia, the European Union’s economic and monetary affairs commissioner.
His comments came amid the latest EU figures showing that the number of persons employed in the EU had decreased by 0.6 percent, or 1.44 million, in the three months to June when compared to the first quarter of the year.
Unemployment in the 16-member eurozone has already exceeded the 15-million mark, with the jobless rate in the EU as a whole surging to a four-year high of 9.0 percent over the summer.
Despite marked improvements in the performances of the EU’s largest economies, unemployment in the EU was likely to exceed the 10 percent mark next year, officials said.
“The situation has improved – mainly due to the unprecedented amounts of money pumped into the economy by central banks and public authorities – but the weak economy will continue to take its toll on jobs and public finances,” Almunia said.
The commissioner said governments should provide training schemes and promote “active labour market policies” designed to ensure that the unemployed can find a job once the economy fully recovers.
EU governments have pumped billions of euros into their economies to mitigate the impact of the bloc’s worst recession in decades.
According to Almunia, additional discretionary spending will have totalled 2.5 percent of the EU’s GDP over the 2009-10 period. If “automatic stabilizers” such as unemployment benefit payments are also taken into account, the size of the EU’s stimulus package will have amounted to 5.5 percent of GDP by next year.
But with this additional spending leading to ballooning budget deficits across the EU, Almunia once again urged governments to start thinking about how to rein in public spending.
“We need to define a clear, credible and coordinated ‘exit strategy’ to put public finances progressively back on a sustainable path and to find the necessary resources to increase Europe’s growth and jobs potential,” Almunia said.
The governments of Ireland and Spain are among those that have already announced tax hikes in order to reduce public debt.
Almunia insisted that Monday’s figures should be treated with “a mix of optimism and prudence,” noting that the speed of the recovery would depend on a number of factors, including the fragility of the financial sector and the impact of weak labour markets.
Monday’s interim forecasts were based on the outlook for Germany, Spain, France, Italy, the Netherlands, Poland and Britain, which together account for 80 percent of the EU economy. Of these, only Spain was expected to remain in recession until at least 2010.
