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European economy making tentative recovery

GDP growth in the EU expected to gradually pick up, though recovery less robust than past upturns.


European economy making tentative recovery

GDP growth in the EU expected to gradually pick up, though recovery less robust than past upturns.

The recession ended in the third quarter of 2009, thanks largely to fiscal and monetary measures to stimulate the economy. But temporary factors also played a role, says the latest EU economic forecast.

In 2010, the EU economy looks set to expand by 1% – a ¼ percentage point more than the commission had forecast in the autumn. The increase stems in part from the stronger global economy. In 2011, GDP growth of 1¾% is expected.

Increasingly the speed of recovery will vary across EU countries, reflecting their individual circumstances and policies.

Unemployment rose sharply during the recession, although slightly less than initially thought last autumn. This year, EU unemployment is projected to level off at close to 10%.

Public finances have also been hit hard by the crisis. While national budget deficits are projected to peak this year at 7¼% of GDP, the ratio of public debt to GDP is expected to continue to rise.

Inflation has rebounded a bit from very low levels in 2009, but the slack in the economy is likely to keep wage and price gains in check. This year, inflation is expected to reach 1¾% in the EU and 1½% in the eurozone.

The EU recovery continues to be surrounded by a high degree of uncertainty, as illustrated by recent tensions in government bond markets. Overall, however, the risks to the forecast are broadly balanced.

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