Teetering on the brink of recession: eu slashes economic growth forecasts

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countries in the euro-zone are sliding toward recession -- that at least is the forecast of the European Commission. The European Union's executive said Wednesday that it was slashing

its economic growth prognosis for the 15 EU countries that have the euro as their currency. Europe is now braced for a slowdown amid high inflation, collapsing real estate markets in some

countries and the ongoing turmoil in financial markets. While the bloc as a whole was predicted to escape recession, Germany, Spain and non-euro zone member the United Kingdom, will not be

so lucky, according to the Commission. It cut the growth estimate for the zone for the whole of 2008 from 1.7 percent to 1.3 percent, a sharp drop from the solid 2.6 percent growth

experienced last year. Growth for the entire 27-member bloc has been downgraded from 2 percent to 1.4 percent. "This is not good news indeed," said Joaquin Almunia, the EU's

economic and monetary affairs commissioner, who presented the forecast. "We are living in a very uncertain environment … The way the European economies will start 2009 will not be very

good." The report said that Germany, the EU's largest economy, had experienced two consecutive quarters of negative growth between April and September, but was still expected to

achieve a positive growth rate for the entire year of 1.8 percent. Alumnia said that Germany was suffering a "slowdown," due to a drop in exports which could be blamed on the high

euro exchange rate against other currencies. The gloomy outlook is likely to increase the pressure on the bloc's finance ministers who are meeting this weekend in the French city of

Nice to consider further reforms to boost their economies. Alumnia held out a small glimmer of hope, pointing out that the recent depreciation of the euro against the dollar and a drop in

oil prices were bound to provide some relief. Meanwhile, Jean-Claude Trichet , president of the European Central Bank, called on governments in the EU to work closely with labor unions and

commodity sellers to keep a cap on wages and prices to prevent further inflation. Speaking to a European Parliament committee on Wednesday, he said that he expected a gradual recovery

"in particular if a fall in oil prices from a peak in July will help strengthen real disposable income." Luxembourg Prime Minister Jean-Claude Juncker said on Wednesday that he did

not expect to see recession despite the gloomy forecasts. However, he did say that the "economic slowdown will be quite pronounced and longer than initially foreseen." _smd --

with wire reports_