Europe is going down the swanny

mastermind2005

An unexpectedly sharp correction in house prices resulting from the global credit squeeze poses a significant risk to growth in Europe, according to the European Commission.

The European Union's executive arm forecast a gradual slowdown in growth from 2007 to 2008 but said continuing financial market turmoil meant the risks were "clearly tilted to the downside".

Among the threats it identifies is a worsening of the financial turmoil that could hit housing markets in Europe as well as the US "thereby deepening and prolonging the ongoing corrections".

So far, those European countries that saw the fastest growth in house prices, such as the UK, Spain, Ireland and France, have generally seen an orderly slowdown this year. But the Commission's latest EU economic forecast hinted at policymakers' fears of a sharper adjustment. A special section on past house price cycles warned that while other regions were sometimes more volatile, "the historical experience suggests that major housing downturns have also had a substantial macroeconomic impact".

Overall, the Commission expected European economic growth to "hold up reasonably well". Financial market turbulence would peter out but still hit investment and consumption growth. Tighter financing conditions were likely to affect mainly construction investment and "thereby accelerate the ongoing correction of the housing market in some countries like Spain and Ireland".

Joaquín Almunia, the EU's monetary affairs commissioner, said: "We consider that investment will continue to contribute positively to growth, but less than in this year or 2006. And in particular, residential construction investment will have a significant correction, and will contribute much less than in the previous periods to our growth."

Housing and construction had contributed enormously to Spanish growth, so the international problems would have a particular effect there, he added.

EU growth will slow from 2.9 per cent this year - slightly higher than expected in September - to 2.4 per cent next year and in 2009, according to the Commission. Mr Almunia attributed the downward revision mainly to the financial market turmoil.

Growth in the 13-country eurozone would drop from 2.6 per cent this year, to 2.2 per cent next year and 2.1 per cent in 2009.

The European Central Bank offered a similarly cautiously upbeat assessment of European growth prospects earlier this week. But like the ECB, the Commission also expressed fears about the impact on inflation of higher oil prices and tightening labour markets - which it said were lifting consumers' inflation expectations. "This is not a good signal. For this reason we consider in this forecast that the upside risks to inflation are clearly increasing," Mr Almunia said.

Eurozone inflation hit 2.6 per cent last month but the Commission expected an easing of oil prices to lead to a deceleration of price pressures during 2008. Overall eurozone inflation was expected to rise from 2 per cent this year to 2.1 per cent next year before falling back to 2 per cent in 2009.


http://www.msnbc.msn.com/id/21710277/

This would be from Charlie McCreevy's office wouldn't it?

It all makes sense now.

Paulw

Wow, and if it's on MSN.com then it must be true.

I think the US are much more worried about their own housing market, and they are trying to reassure people by making out that the whole world is going down. More so when the Euro is now much stronger than the US dollar.

Large pinch of salt to be taken with that article, I think.

Cantab.

Paulw wrote: »

Wow, and if it's on MSN.com then it must be true.

I think the US are much more worried about their own housing market, and they are trying to reassure people by making out that the whole world is going down. More so when the Euro is now much stronger than the US dollar.

Large pinch of salt to be taken with that article, I think.

Agreed. MSNBC... Dear god...

Uuuh Patsy

Cantab. wrote: »

Agreed. MSNBC... Dear god...

It was fox I'm sure they'd had managed to put some pro Bush anti terrorism tilt to it. "Terrorist Attack on Credit!"

moe_sizlak

on fox business show , your world with neil cauvuto , when the DOW makes big gains its the top story , one which he follows by reassurring his viewers that the economy under bush is doing great , when the DOW is falling which happens a lot lately , he just lets the ticker across the bottom of the screen deliver the bad news