Euro Exchange Rate News

EC forecasts show that austerity may not be the way

The European commission has revealed its forecast for the next two years and the outlook is grim. The EC predicts that most of the European Union countries will see increases in their budget deficits and that most of them will face mild recessions.

The austerity measures imposed on the EU were meant to lower the high debts and deficits faced by most of its member nations, instead the opposite is predicted. The forecast predicts more bad news for Spain saying its budget deficit will jump to 6.4% of GDP this year compared with a previous forecast of 5.9%. It’s also bad news for its unemployment figures with the number of people out of work expected to rise to a staggering 25%.

The EC said; “Whereas the (5.3 percent) target of the central government should be within reach, deviations are projected at this stage for regional governments. This reflects the standard no-policy-change assumption and the fact that not all consolidation measures at regional level for 2012 have been specified yet.”
Spain is not the only nation predicted to see increases in its deficit despite imposing harsh austerity measures. Portugal and Greece will both see increases with other nations seeing only slight decreases.

Portuguese deficit will be 4.7% (was 4.5%)
Greece 7.3% (7%)
Italy 2% (2.3%)
France 4.5% (5.3%)
Germany 0.9% (1%)

The EC explained the increases by saying; “Government debt to GDP ratios are forecast to increase in most member states. In the euro area, increasing interest payments and low growth are contributing to push up debt ratios.”

Today’s forecast is sure to be a boost to newly elected French President Francois Hollande who got elected on the promise of renegotiating the fiscal pact. A stance that Germany is still denying can happen. The increase in deficits is sure to reignite anger at the austerity plans and put pressure on the Eurozone members to find an alternative policy.
When asked by journalists if he believed Austerity was working the European Commissioner for Economic and Financial Affairs Olli Rehn summed fobbed them off by saying, “That’s too simple, simplistic,” before waffling on about bonds.

Elsewhere there was some good news for the UK with its growth predicted to match Germany’s by 2013 at a rate of 1.7% by next year.

The Pound to Euro exchange rate is currently trading at 1.245

The Pound to US Dollar exchange rate is currently trading at 1.610

The Euro to US Dollar exchange rate is currently trading at 1.293

The Euro to Pound exchange rate is currently trading at 0.803

 

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