WALL STREET JOURNAL: The European Union’s official economists Friday predicted the euro-zone economy will shrink for the second year in a row in 2013 and the third year in the last five, in a forecast that sees little hope that easing financial-market tensions in the region will provide a jolt to the real economy any time soon.
The European Commission, the EU’s executive arm, forecasts a 0.3% contraction for 2013 and sees falling spending by businesses, consumers and national governments pushing euro-zone unemployment to a new high. Mass joblessness is expected to increase in the countries hardest hit by the crisis, with the average unemployment rate expected to reach 27% in Greece, 26.9% in Spain and 17.3% in Portugal.
Unemployment will be a huge obstacle for governments as they attempt to carry out austerity programs that are partly responsible for the bloc’s dismal growth and employment situation. The first big test is likely to come in France, which the commission expects will miss a pledge to bring its deficit under 3% of gross domestic product by the end of this year. The forecast sees the French deficit this year at 3.7% of GDP. “This has grave social consequences and will, if unemployment becomes structurally entrenched, also weigh on growth perspectives going forward,” said Marco Buti, the commission’s top civil servant, in a statement… (more)
EDITOR: It is all so foolish, as has been shown in the past. By cutting back spending rather than increasing it, unemployment grows and revenues decrease. Some people’s ideologies make it impossible for them to learn from evidence. Upon recovery, then cutting back federal expenditures and increasing taxes are in order and will succeed as they did during the latter Clinton era.
