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The coming year promises to be difficult for the economy of Europe. According to the forecast of the European Commission in November, the economic growth rates of the EU countries will slow down to 2.4% per annum. However, already now EC Commissioner for Finance Joaquin Almunia calls the November forecast too optimistic. In an interview with EuroNews, Almunia explained why:
“For several months, we proceeded from the fact that in 2008 the economy of Europe and the euro area will continue to grow, although it will not be as fast as in 2007. Now there is a series of incidental circumstances – for example, the crisis in the unsecured mortgage market in “The United States, or a disease of financial markets that have lost access to credit. Thus, the economic outlook today looks worse than a few months ago.”
The economics of Europe are giving new alarming signals. At the end of December, the index of confidence of European company managers in the economy fell. The jump in prices of oil and other raw materials and the strengthening of the euro against the dollar unnecessary for exporters do not please big business.
The European Central Bank, which will hold its first meeting on Thursday, is at a crossroads. The economic situation requires a reduction in base interest rates on loans in the euro area. However, the record inflation rate over six years (3.1% in December in the euro area) gives reason to at least keep rates at the same level. Or even raise them.