EUROZONE REGION : GLOBAL ECONOMIC LAGGARD

The Euro Area is the second largest economy in the world and if it was a country it would be the fourth most populous with 330 million inhabitants. France, Germany, Italy and Spain are the most important economies accounting for over 74 percent of the Union’s GDP.

BUT, according to the European Commission latest prediction the Eurozone bloc will grow only 1.1 per cent next year, down from a forecast of 1.7 per cent just six months ago. The revisions are particularly big in Germany and France, the two largest eurozone economies, for which the Commission has cut its projections by nearly a full percentage point for 2015. The Gross Domestic Product forecast for Germany, the common currency’s economic engine, was cut from 2 per cent in May to 1.1 per cent; France went from 1.5 per cent to 0.7 per cent?

Italy, the third largest eurozone country, after Germany and France, should have growth of 0.6 per cent next year, down from 1.2 per cent in the EC’s spring forecast. While Italy’s forecast was halved, the Italian government is likely to take some relief in the figure. Italy is in third recession since 2008 and any growth is better than no growth.

In Spain, which is out of recession, the unemployment rate is 23.7 per cent, only three percentage points less than its peak in early 2013. Spanish youth unemployment is an astounding 56 per cent. Growth of 1 per cent or 2 per cent is unlikely to trigger a significant dip in the jobless rate.

The struggles the eurozone faces to return to a sustainable growth path lie in stark contrast to the US, which for the second and third quarter was the fastest six months of growth in a decade, and the UK, which is one of the fastest-growing economies in the Group of Seven. The Commission raised its forecast for the UK saying it expected the economy to expand 2.7 per cent next year, compared with the 2.5 per cent May forecast.

The Commission said it was currently forecasting a 4.5 per cent deficit for France next year, though that does not include some of the recent economic reforms announced by Paris. The most troubling economic news for the EU, however, is likely to be Germany, which had long been the one bright spot in an otherwise troubled continent. The Commission said a recent spate of bad economic news was likely to continue into the first half of next year, fuelled by declining industrial orders and worsening business sentiment.

For the overall EU 28 , jobless rate stands at 10.1 percent. Across Europe, about 24.5 million people are unemployed including nearly five million youths, out of a working-age population of about 243 million people.

A struggling labor market and weak price pressures are symptoms of the same problem: insufficient demand. Businesses are not investing and hiring fast enough to restore growth because prospects remain uncertain, at best, and households are keeping a tight handle on spending for the same reason.