By: DailyForex.com
The European Commission (EC) has radically cut back its growth projection for 2013. Previously, the EC had forecast that the Eurozone economies would grow by 1% next year, but their most recent forecast is that growth within the 17 member state bloc will be an anaemic 0.1%. However, it is predicting that a recession will be avoided by the Eurozone. Their current projection for 2012 is that the zone will suffer a contraction of 0.4% and the wider EU will shrink by 0.3%.
Taken together with a renewed focus on America’s fiscal cliff threat, the EC prediction has helped to send both the Euro and global stock markets lower. The mood was not eased by the release of the worst set of manufacturing output figures for German industry since April. The Euro is currently trading at $1.2737 and the Pound is buying €1.2535. When the forecast emerged, the Paris and Frankfurt exchanges lost 2% and London closed 1.6% lower and the Dow gave up 2.4% of its value, losing all gains made since August. The markets have continued to fall in subsequent trading.
Whilst the number of jobs created in the USA has improved, on the other side of the pond, EU unemployment has hit a fresh high. Eurozone unemployment has risen to 11.6% and the EC’s forecast is that it will continue to worsen, peaking at 12% (one worker in eight) next year. The Commission anticipates that the unemployment situation will not ease before 2014. The unemployment picture is very uneven across the Eurozone with the lowest level being just 4.4% in Austria and the highest being 25.8% (more than one worker in four) in Spain. The burden of unemployment is also not evenly spread with many younger people finding it hard to secure employment in many nations.