by Andrew Willis
A wave of economic bad news buffeted Europe on Monday (30 March), with European Central Bank president Jean-Claude Trichet saying he expected falling growth in each quarter of 2009.
"Latest information suggests economic activity has deteriorated further in the first quarter of 2009. Looking ahead, we expect demand to remain very weak throughout 2009, both at the global level and in the euro area," Mr Trichet told MEPs in Brussels.
A gradual recovery is now not predicted before 2010, while several European economies may have to wait until 2011 or later for signs of an upturn.
Rating agency Standard and Poors cut Ireland's top credit rating on Monday from AAA to AA+, making it more expensive for the government of the western isle to borrow money at a time when tax receipts have plummeted. The country is expected to borrow as much as €25 billion this year to plug the shortfall.
"This is bad news for Ireland at a very bad time. Standard & Poor's decision to downgrade Ireland's credit rating will make it even harder for the economy to recover," said Richard Bruton, the opposition spokesman on finance, reports Bloomberg.
S&P downgraded ratings for Spain, Portugal and Greece in January.
Spanish deflationary fears
Addressing the economy committee on Monday, Mr Trichet told MEPs that inflationary pressures "have diminished further."
"Looking ahead, we expect the inflation rate to remain well below two percent for this year and 2010," he said, but ruled out the prospect of deflation for the euro area as a whole.
However, for a number of individual countries the threat of deflation remains very real.
In Spain, the National Statistics Institute said on Monday that month on month inflation for March had fallen by 0.1 percent, marking the first time prices have fallen since the current measuring system began in 1997.
Dropping prices can convince shoppers to postpone purchases as they anticipate further falls, driving down consumption while at the same time increasing the real value of debt.
Deflation is also a concern in Ireland and the UK.
Fall in European economic confidence
On Monday, the European Commission reported that consumer and business confidence slumped to a record low in March.
The EU executive said its economic sentiment indicator for the euro area fell to 64.6 points in March, down from 65.3 points in February. This new level marks the lowest point ever recorded since the survey began in 1985.
For the EU27, the index fell to 60.3 points from 60.9, marking a slower rate of decline following a number of sharp drops since September 2008 when the US bank Lehman Brothers collapsed.
OECD warns of huge job losses
While many thousands have already lost jobs in Europe since the onset of the financial crisis, economists and unions warn that there is a natural time-lag before falling production is converted into job losses, indicating that the worst may still be to come.
A new report to be published on Tuesday (31 March) by the Organisation for Economic Co-operation and Development forecasts that unemployment rates will approach 10% in the OECD area by 2010, compared with the recent low of 5.6 percent in 2007.
If proven to be accurate, the numbers of unemployed in the OECD area will rise by about 25 million, by far the largest and most rapid increase in OECD unemployment in the post-war period.
"Governments need to take quick and decisive action to avoid the financial crisis becoming a fully-blown social crisis," OECD secretary-general Angel Gurria told G8 Labour and Employment Ministers in Rome on Monday.
The ECB is aware of this need for action, making a euro area interest rate cut from the current 1.5 per cent level highly likely when the board meets this Thursday. An announcement on a new policy to buy corporate bonds may also be included.
Source: www.euobserver.com
A wave of economic bad news buffeted Europe on Monday (30 March), with European Central Bank president Jean-Claude Trichet saying he expected falling growth in each quarter of 2009.
"Latest information suggests economic activity has deteriorated further in the first quarter of 2009. Looking ahead, we expect demand to remain very weak throughout 2009, both at the global level and in the euro area," Mr Trichet told MEPs in Brussels.
A gradual recovery is now not predicted before 2010, while several European economies may have to wait until 2011 or later for signs of an upturn.
Rating agency Standard and Poors cut Ireland's top credit rating on Monday from AAA to AA+, making it more expensive for the government of the western isle to borrow money at a time when tax receipts have plummeted. The country is expected to borrow as much as €25 billion this year to plug the shortfall.
"This is bad news for Ireland at a very bad time. Standard & Poor's decision to downgrade Ireland's credit rating will make it even harder for the economy to recover," said Richard Bruton, the opposition spokesman on finance, reports Bloomberg.
S&P downgraded ratings for Spain, Portugal and Greece in January.
Spanish deflationary fears
Addressing the economy committee on Monday, Mr Trichet told MEPs that inflationary pressures "have diminished further."
"Looking ahead, we expect the inflation rate to remain well below two percent for this year and 2010," he said, but ruled out the prospect of deflation for the euro area as a whole.
However, for a number of individual countries the threat of deflation remains very real.
In Spain, the National Statistics Institute said on Monday that month on month inflation for March had fallen by 0.1 percent, marking the first time prices have fallen since the current measuring system began in 1997.
Dropping prices can convince shoppers to postpone purchases as they anticipate further falls, driving down consumption while at the same time increasing the real value of debt.
Deflation is also a concern in Ireland and the UK.
Fall in European economic confidence
On Monday, the European Commission reported that consumer and business confidence slumped to a record low in March.
The EU executive said its economic sentiment indicator for the euro area fell to 64.6 points in March, down from 65.3 points in February. This new level marks the lowest point ever recorded since the survey began in 1985.
For the EU27, the index fell to 60.3 points from 60.9, marking a slower rate of decline following a number of sharp drops since September 2008 when the US bank Lehman Brothers collapsed.
OECD warns of huge job losses
While many thousands have already lost jobs in Europe since the onset of the financial crisis, economists and unions warn that there is a natural time-lag before falling production is converted into job losses, indicating that the worst may still be to come.
A new report to be published on Tuesday (31 March) by the Organisation for Economic Co-operation and Development forecasts that unemployment rates will approach 10% in the OECD area by 2010, compared with the recent low of 5.6 percent in 2007.
If proven to be accurate, the numbers of unemployed in the OECD area will rise by about 25 million, by far the largest and most rapid increase in OECD unemployment in the post-war period.
"Governments need to take quick and decisive action to avoid the financial crisis becoming a fully-blown social crisis," OECD secretary-general Angel Gurria told G8 Labour and Employment Ministers in Rome on Monday.
The ECB is aware of this need for action, making a euro area interest rate cut from the current 1.5 per cent level highly likely when the board meets this Thursday. An announcement on a new policy to buy corporate bonds may also be included.
Source: www.euobserver.com
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