Almunia Says EU to Cut 2009 Economic Estimates to ‘Negative’

By Meera Louis

Nov. 27 (Bloomberg) -- The European Union will cut its economic forecasts to project a contraction next year as the region continues to reel from the impact of the global financial crisis, EU Monetary Affairs Commissioner Joaquin Almunia said.

“We need to revise our previous estimates to negative growth,” Almunia said in Brussels today. “The crisis may not end next year.”

The financial turmoil has pushed the euro-area economy into its first recession since the introduction of the single currency almost a decade ago, prompting the EU to propose a 200 billion-euro ($258 billion) stimulus package yesterday. The European Commission, the EU executive, on Nov. 3 cut its 2009 growth forecast to 0.1 percent and estimated that gross domestic product will shrink for three consecutive quarters this year.

While Almunia avoided the word recession when talking about next year’s outlook, he is the second policy maker in as many days to suggest economic contraction is in store for 2009. European Central Bank President Jean-Claude Trichet said in a newspaper interview yesterday that there may be “negative figures” for growth next year.

The International Monetary Fund this month predicted that the economies of the euro region, the U.S. and Japan will all shrink next year, which would be the first simultaneous recession in those economies in the post-World War II era. Global growth will slow to 2.2 percent in 2009 from 3.7 percent this year, the IMF said.

New Projections

The European Commission is scheduled to issue updated economic forecasts in February. The ECB is due to publish new projections on Dec. 4, and Kenneth Wattret, an economist at BNP Paribas in London, says the bank may cut its 2009 forecast to a contraction as deep as 0.5 percent. In September, the ECB lowered its 2009 growth outlook to 1.2 percent from 1.5 percent.

The ECB, which lowered its benchmark rate by a full percentage point in a month, has indicated more reductions are possible. Europeans’ confidence in the economic outlook fell to a 15-year low this month even after the rate cuts and stimulus measures aimed at countering the financial crisis, data today showed.

Germany, France and Spain have already announced measures to boost their economies, and Spanish Prime Minister Jose Luis Rodriguez Zapatero plans to announce further actions in Madrid this afternoon. “We may even need more,” European Commission President Jose Barroso said in unveiling yesterday’s coordinated proposal.

To contact the reporter on this story: Meera Louis in Brussels at mlouis1@bloomberg.net.