Reversing an earlier forecast, the commission, governing council of the European Union, now forecasts that the economy of the 16 nations that comprise the euro zone will contract 1.9% in 2009, a downward revision from the September 2008 estimate of a scant 0.1% growth. (There are 27 nations in the larger European Union, with 11 who are not members of the euro zone's monetary union.)
Further, the EU sees GDP increasing just 0.5% in 2010 in the euro zone. As a result of the recession, and the slow, gradual recovery, euro zone unemployment is expected to increase to 9.25% in 2009, "with a further increase in 2010," but the EU did not specify an unemployment rate estimate for 2010.
Economist Peter Dawson told BloggingStocks Monday although the euro zone did not experience anywhere near as large a housing bubble as the United States, the bursting of the bubble and consequent financial crisis have created negative ripples in the euro zone economy almost as bad as those in the states.
"Continental Europe is not seeing the effect on households and the construction sector as much as the U.S. is, but in almost every other dimension, Europe is being hurt," Dawson said. "The big factors are the fall-off in commerce, exports, and the reluctance of banks and others to lend money or invest capital."
The EU forecasts Germany's economy to contract 2.3% in 2009; France, 1.8%; Spain, 2.0%; Italy, 2.0%; and Ireland, 5.0%.
Economic Analysis: The euro zone GDP forecast provides yet another data point for the need for fiscal stimulus, everywhere. Every major economy, the U.S., EU, and Japan, is in recession, and China and Russia are in slow-growth equivalent-recessions. As noted, given the size of the global economy, one region alone can not reverse the global contraction: we'll need all national engines pulling to get this train to leave the station.
Why is gold making a new high, trading at $1,118.00 per ounce?
Chasing Value: Ten stocks for 2010 -- Part 1 
Closing Bell: A six-day rally (AIG, REGN, M, MOT, PALM, RIMM)
