Further rate cut will not solve eurozone’s ills

THE European Commission published its latest economic forecasts for the EU and the eurozone last week which highlighted the growing risks of recession in the eurozone and the dangers posed to the global economy from the sovereign debt crisis in the euro area.

The report was published in the middle of the latest crisis in the area involving Italy and Greece and the emergence of pressure on French borrowing costs.

The commission now expects real GDP in the eurozone will rise by just 0.5% in 2012 compared with 1.5% in 2011. In its last semi-annual report in the spring, it had forecast that the euro area would grow by 1.6% in 2011 and by 1.8% in 2012. The commission has also released a first forecast for 2013, projecting a rise in real GDP of 1.3%.