European Economic Growth - Essay Example

This global financial crisis tagged with dire housing market corrections has resulted in a peculiarly uncertain situation (European Commission). The resultant shock has reduced the domestic demand throughout the EU, which is pathetically debilitating considering the fact that the external demand is already on the ebb (European Commission). The autumn economic forecast published by the European Commission in November 2008 reflects a crucial stagnation of the EU economy by the end of the year 2009.

Though the inflationary pressures are expected to ease, the labour market and the financial sector is predicted to deteriorate even further (European Commission). Most of the European economies are either already in or are on the verge of facing a recessionary situation and the economic growth is expected to dip down even further (European Commission). As per the current estimates, the GDP growth in the EU is projected to retard to 1.4 percent by the end of the year 2008 and will dip down to a worrying figure of 1.

1 percent by 2010 (European Commission). The consumer price inflation that has already achieved its peak level is expected to plummet to 2.25 percent in 2009 and to approximately 2 percent by the end of the year 2010 (European Commission). . prices and a relative softening of the labour markets because of the bleak prospects pertaining to the overall economic growth (European Commission). (European Commission) The labour markets are already being impacted by stagnation in the economic growth and this is expected to give way to a drastic fall in the employment levels throughout the EU.

The employment situation is expected to ease beyond 2009 (European Commission). That will lead to the creation of 0.25 million jobs in the EU in 2009-2010 (European Commission). However, this increase is strikingly less as compared to 6 million jobs created in the EU in 2007-2008 (European Commission). Thus the unemployment rate in the EU is expected to appreciate by 1 percent in the next two years, thus achieving an overall figure of 7.8 percent (European Commission). So far as the public finances are concerned, the present circumstances portend a bleak scenario.

The deficit in the government budgets that was roughly 1 percent of GDP in 2007 is expected to appreciate to 2.6 percent by 2010 (European Commission) (European Commission)Considering the fiscal and monetary packages being extended by the governments to resuscitate the ailing economies, the budgetary deficits may rise even further in the times to come (European Commission). Thus, realistically speaking, the public debt is expected to further rise as this economic crisis worsens.

The current prospects pertaining to the economic growth in the EU are enveloped in a mist of uncertainty, doubts and apprehensions. The existing credit crunch may worsen, persist for a longer period of time and perhaps could have a more debilitating impact on the EU economy. Further corrections in the housing market may be required