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| Eurozone growth forecast cut sharply by European Commission | Eurozone growth forecast cut sharply by European Commission |
| (35 minutes later) | |
| The European Commission has cut sharply its growth forecast for the eurozone, warning that the "difficult process of rebalancing will last for some time". | The European Commission has cut sharply its growth forecast for the eurozone, warning that the "difficult process of rebalancing will last for some time". |
| It now projects the bloc will narrowly avoid recession next year, growing by 0.1%, compared with its previous estimate of 1% growth, and thinks the EU economy will shrink this year. | It now projects the bloc will narrowly avoid recession next year, growing by 0.1%, compared with its previous estimate of 1% growth, and thinks the EU economy will shrink this year. |
| Unemployment would also continue to rise next year, the Commission said. | Unemployment would also continue to rise next year, the Commission said. |
| The revision helped push global stock markets lower. | The revision helped push global stock markets lower. |
| The Paris and Frankfurt exchanges closed down 2%, while London's FTSE 100 ended the day 1.6% lower. New York's Dow Jones was down more than 2% in morning trading. | |
| The euro also weakened against the dollar following the revision, falling by half a cent to $1.276. Against the pound, it fell by a third of a pence to 79.85p. | The euro also weakened against the dollar following the revision, falling by half a cent to $1.276. Against the pound, it fell by a third of a pence to 79.85p. |
| Figures released earlier on Wednesday showing a 1.8% drop in manufacturing output in Germany in September, the biggest monthly fall since April, also weighed on markets. | Figures released earlier on Wednesday showing a 1.8% drop in manufacturing output in Germany in September, the biggest monthly fall since April, also weighed on markets. |
| As did concerns about the upcoming so-called fiscal cliff in the US, now that the US election has been won by Barack Obama. | As did concerns about the upcoming so-called fiscal cliff in the US, now that the US election has been won by Barack Obama. |
| "Having been fixated on the US election and the preferred market outcome of an Obama victory, the initial morning feel good bounce [has fizzled out], as markets quickly moved on to the next potential banana skin," said Michael Hewson at CMC Markets. | "Having been fixated on the US election and the preferred market outcome of an Obama victory, the initial morning feel good bounce [has fizzled out], as markets quickly moved on to the next potential banana skin," said Michael Hewson at CMC Markets. |
| "In this case there are several, starting with today's Greek parliamentary vote on austerity, not to mention concerns about how the newly elected president will deal with the US fiscal cliff concerns." | "In this case there are several, starting with today's Greek parliamentary vote on austerity, not to mention concerns about how the newly elected president will deal with the US fiscal cliff concerns." |
| Under current plans, $600bn (£375bn) of tax rises and spending cuts will kick in in January, with many analysts saying this will push the US economy back into recession. | Under current plans, $600bn (£375bn) of tax rises and spending cuts will kick in in January, with many analysts saying this will push the US economy back into recession. |
| Weak demand | Weak demand |
| In the spring, the Commission forecast that the 27 members of the EU would collectively produce no economic growth in 2012. It now forecasts the EU economy will shrink by 0.3%. It also downgraded its forecast for the eurozone economy this year, from a contraction of 0.3% to 0.4%. | In the spring, the Commission forecast that the 27 members of the EU would collectively produce no economic growth in 2012. It now forecasts the EU economy will shrink by 0.3%. It also downgraded its forecast for the eurozone economy this year, from a contraction of 0.3% to 0.4%. |
| The revisions to next year's forecasts were more stark. While the eurozone is barely expected to grow at all, the EU is now forecast to grow by 0.4% compared with the previous estimate of 1.3%. | The revisions to next year's forecasts were more stark. While the eurozone is barely expected to grow at all, the EU is now forecast to grow by 0.4% compared with the previous estimate of 1.3%. |
| Unemployment in the eurozone currently stands at 11.6%, and the Commission said it would peak at 12% next year. Domestic demand, it said, would remain weak next year before picking up in 2014. | Unemployment in the eurozone currently stands at 11.6%, and the Commission said it would peak at 12% next year. Domestic demand, it said, would remain weak next year before picking up in 2014. |
| "Major policy decisions have laid the foundation for strengthening confidence," said the Commission's vice-president for Economic and Monetary Affairs, Olli Rehn. | "Major policy decisions have laid the foundation for strengthening confidence," said the Commission's vice-president for Economic and Monetary Affairs, Olli Rehn. |
| "Market stress has been reduced, but there is no room for complacency." | "Market stress has been reduced, but there is no room for complacency." |