Europe on the brink of recession

EUROPE is on the brink of recession, according to the latest Gross Domestic Product (GDP) rates for the EU.

But inflation dropped in all member States with the exception of Italy.

The statistics show that technically both Germany, the EU’s largest economy, and the Netherlands, are in recession having zero to negative growth for the last two quarters while average growth slowed to zero for the 15 member states.

These latest figures, together with similarly bad news from Japan, give an edge to the G7 Finance Ministers meeting in France this weekend to discuss reviving global growth.

The figures are also increasing expectations that the European Central Bank will cut their interest rate of 2.5% as the euro continues to gain against the US dollar, increasing pressure on exports.

Ireland continues to have the highest inflation rate in the EU although it dropped from 4.9% in March to 4.6% in April. The eurozone average is 2.1%.

At its meeting last Week the ECB president Wim Duisenberg intimated that it wanted to keep inflation rates between 1 to 2%.

In Germany GDP decreased .2%, while in Holland whose economy is closely linked to its German neighbour, it fell back by .3% and by .1% in Italy.

This is the second quarter that growth has been zero or negative in Germany and the Netherlands which is the textbook definition of recession.

While the figures are not available for all 15 EU members the trend is for negative or slow growth and given that Germany, Italy and the Netherlands account for over half of the euro-zone’s GDP, the signs are not good.

France and Germany have already breached the EU’s 3% budget deficit rule and Italy is expected to follow suite.

The Commission admitted it was slightly surprised by the statistics, which are based on preliminary information and does not cover a number of countries including Ireland.

Ireland in the last quarter of 2002 had the highest GDP growth in the EU at 6.4%.#