Recession Talks Taboo for EU Ministers

The Euro zone is not veering on recession and the 15 nations comprising it need not spend on growth boosting programs.  The assertion came from Jean-Claude Juncker, prime minister of Luxembourg after the meeting of European finance ministers on Friday.

Economic Grind Caught Governments by Surprise

The second quarter grind experienced by the euro zone economies caught governments flatfooted.  Juncker however stressed that a major relief is in the offing as the Euro sinks and oil prices continue to drop.

Juncker vehemently denied that there is an ongoing recession in the euro zone and stressed that the European governments have continuously ruled out the implementation of a stimulus package.  The ministers met at Nice, France.

European officials have been very careful in mentioning the R-word as they refer to the crisis in motherhood terms like “sharper than expected slowdown” and “depressed economic episodes.”

Forecasts Point to Recessions

Surprisingly, the forecasts of the European Union for the economies of Germany, Britain and Spain point to recessionary trends.  The EU expected sharp contractions in these economies that could last for two consecutive quarters.  Analysts predict that the entire European Union and the 15-member euro zone could come out of technical recession and experience gradual and slower growth rates.

The EU expects the euro zone to post growth rates of 1.3 percent after suffering a 0.2 percent contraction in the second quarter.  The entire Union however is expected to post a 1.4 percent growth rate.

EU officials warned some economies that they could be hit hard by spiraling inflation, adding that some countries could suffer a slump due to the crumbling real estate market and continued troubles at the financial markets.

Gilles Moec, of Bank of America said the expectation of a second quarter negative growth poses tremendous risks but added that the risks will like be short-lived.  Moec further stressed that economies today can clearly see the avenues for economic recovery before a recession could occur.  

The sinking Euro in the face of the Dollar surge gave relief to the export industries as oil and commodity prices continue to sink also.  UniCredit analyst Marco Annunziata said that the euro zone could certainly escape recession periods but only on a slight margin.  

No Stimulus Package for Europe

The European economies contrast greatly with the United States in terms of delivering stimulus and spending packages and programs.  U.S. Democrats are pushing for another round of stimulus program as a follow up to the initial $93 billion launched early this year.

Juncker said that the entire European Union should rule out additional spending for growth stimulus packages and tax breaks.  However, the Luxembourg prime minister said countries the have large budget surpluses are free to decide where they should spend their money.