European Union in Recession

POLITICS - While nervous Americans are hand wringing over tomorrow's presidential election across the Atlantic the European Union is now in a recession. The United States has been in a recession for the last year approximately.

The European Commission said today that the economy in the 15 countries that use the Euro is in a recession and will barely grow during 2009, with upbeat estimates suggesting the EU's economy will expand just 0.1 per cent as the global financial crisis hits hard. More dire estimates suggest GDP shrinkage of 1% or worse.

Germany, France and Italy (traditionally the big three European moneymakers) are not growing at all at 0.0 per cent. Britain is also expected to join the rest of the EU in a recession in 2009, with GDP shrinkage of 1%.

The 27-member EU warned that things may get even worse as forecasters could not rule out a deeper credit crunch that would brake the economy, strain government finances and put a near-freeze on household spending.

Oil prices should fall from a 2008 average of $104 US a barrel to $86 US next year, but food and metal prices will probably stay at high levels.

The cost of bailing out troubled banks while tax revenues shrink and welfare payouts swell will see governments pile on debt and run bigger deficits. France and Ireland will break EU budget rules in 2009 by running a yearly government deficit of more than 3 per cent of GDP. The ceiling is intended to keep their shared currency stable. Britain, Latvia, Lithuania, Romania and Hungary will also likely exceed the limit.