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EU Expects Deep, Lengthy Recession

Government spending will be only thing keeping European economies afloat

By the Associated Press

Posted Jan 19, 2009 8:26 AM CST

(AP) – The European Union said today it is facing a "deep and protracted recession" with government spending the only source of growth. The 16 nations that use the euro will shrink 1.9% in 2009, with the entire EU contracting 1.8%, the European Commission forecasts. The EU will lose 3.5 million jobs as business and household spending falls and lending slows.

Government demand and investment will be the only source of growth—but that carries a heavy price tag. Government deficits will hit the highest level in 15 years as they borrow heavily to stoke growth. The EC says the economy would be faring much worse without current EU nations' plans to boost growth by spending 1% of gross domestic product this year.

A woman pushes her shopping trolley in a supermarket in Madrid. A falloff in consumer spending will have a huge impact on the EU in 2009.
A woman pushes her shopping trolley in a supermarket in Madrid. A falloff in consumer spending will have a huge impact on the EU in 2009.   (AP Photo)
European Commissioner for the Economy Joaquin Almunia speaks during a media conference at EU headquarters in Brussels today.
European Commissioner for the Economy Joaquin Almunia speaks during a media conference at EU headquarters in Brussels today.   (AP Photo)
The European Union is facing a deep recession as spending and lending decline.
The European Union is facing a deep recession as spending and lending decline.   (AP Photo)
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