As spillovers of the financial crisis are currently affecting the "real" economies around the globe, the economic prospects of the European Union (EU) and its member nations have become a focal point of worldwide attention.
Germany:
According to the latest annual economic forecast by the Federal Statistical Office, Germany will be in its deepest recession in 2009 ever since Federal Germany was established some two decades ago. Its economy will contract 2.25 percent this year but will hopefully "warm up" in the latter half of the year. Its foreign trade will slide 8.9 percent and the number of the jobless will reach 3.5 million at the end of 2009, and its inflation risks will have gone up, according to the forecast report.
The federal government first approved a 500-billion as federal "fictitious bailout" plan and latter ratified 32 billion and 50 billion euro rescue packages with money to be used for highways, schools and other public works projects. The second rescue package is the biggest-ever stimulus package Germany has ever thrashed out in the post-war period.
In addition to a recession for this year, Federal Germany has experienced four recessions or "years of crisis" over the past four-plus decades in 1967, 1975, 1982 and 1993 with its economic growth rate of -0.3 percent, -0.9 percent, -0.4 percent and -0.8 percent respectively, notes the German "Der Spiegel" weekly. From these figures, people can come to see how grave the extent of recession for this year can be!
It may not be so difficult for Germany in 2009 to keep the budget deficit within the EU-mandated limit of 3 percent of GDP, acknowledged German Finance Minister Peer Steinbruck, but it will be hard to say for the next year.
Britain:
Official figures released on January 20 showed that the British government had run up total debts of 697.5 billion pounds, or 47.5 percent of GDP, by the end of 2008.
The British government announced a 400 billion pound bailout plan in October 2008, but without much substantial effect. On January 19, Prime Minister Gordon Brown approved a second rescue plan for Britain's ailing banks. Meanwhile, he announced to set aside as much as 50 billion pounds (or 74 billion US dollars) to create a special fund for the Bank of England to buy high-quality government bonds in a bid to increase lending to related enterprises. According to the Monetary Policy Committee of the Bank of England recently, the British economy will bounce back by the year end of 2010.
For a long period of time, Britain has kept itself away from the euro zone, and the ongoing global financial crisis will give rise to a renewed debate about euro zone membership.
France:
With the onslaught of global financial crisis, French economy currently has a tougher and more difficult time and, in fact, French economy has been hitting a "red light zone" in all sense.
French lawmakers in late October 2008 approved a huge 360 billion-euro rescue package to bail out banks, which were severely affected the credit crisis. In early December last year, President Nicolas Sarkozy unveiled a 26 billion euro stimulus plan for the faltering economy. France weighs support program for ailing automakers and on January 20 decided to pump 5-6 billion euro (up to 7.79 billion US dollars) for troubled automakers. Moreover, France also plans to input 175 billion euro in science, technology, environmental protection and other spheres over the next three years.
To date, France's total debts have amounted to 1.3 trillion euro with an average of 20,000 euro per capita. It has been estimated that France would have a deficit of 5.4 percent of GDP this year. Its GDP rose by 0.7 percent in 2008 and is expected to contract 1.9 percent in 2009.
European Union:
EU predicts that its economy as a whole will contract or decline 1.8 percent, whereas it forecasted two months earlier that its economic growth would increase by 0.2 percent. All its major economies have been sinking into recession, and the British, German, Italian and French economies will trim 2.8 percent, 2.3 percent, 2 percent and 1.8 percent respectively.
Jean Claude Junker, the prime minister of Luxemburg and president of the Euro zone group, deems that the European economy would have to "get through the next two years" before resuming normal by 2011. He went on to predict that the positive role of interest rate cut by the European Central Bank is expected to manifest in the later half of 2010.
Experts' comments:
For the European Union, what counts vital and important is not only to respond to the financial crisis, but to base the EU economy on the Lisbon strategy, so that the EU will be turned into the world's premier "knowledge economy" by 2010, which will be most viable, competitive and thriving. And what merits particular attention is that some EU member leaders have on a couple of occasions stressed the heightened confidence and coordination to deal with the financial crisis and their firm opposition to trade protectionism; this is due contributions they should make to the eventual recovery of global economy.
Financial deficit of EU member states must not exceed 3 percent of GDP in compliance with the Stability and Growth Pact adopted by the EU in 1997 as a Council Resolution. Since the outbreak of financial crisis, however, the EU member nations have been permitted to have a relatively greater degrees of flexibility, but such flexibility should be kept within the given limits.
By People's Daily Online, and its authors are PD reporters Lu Hong and Niu Ruifei, and PD resident reporters in Belgium and France Li Yongqun and Gu Yuqing
(People's Daily February 4, 2009)