Economic growth rates in Greece will exceed Eurozones average growth rates in the 2009-2010 period, the European Commission said in its autumn forecasts on the EU economy. The EUs executive said it expected Greek GDP to grow by 2.5 pct in 2009 and 2.6 pct in 2010, sharply up from 0.1 pct and 0.9 pct in the Eurozone over the same period, respectively and growth rates of 0.2 pct and 1.1 pct in the EU-27. Greek economic growth was 3.1 pct in 2008, the Commission said. The countrys fiscal deficit was 3.5 pct of GDP in 2007 and was expected to fall to 2.5 pct of GDP this year.

The Commission forecasts that the Greek fiscal deficit would fall to 2.2 pct in 2009 only to rise again to 3.0 pct in 2010. Public debt was 94.8 pct of GDP in 2007 and was expected to ease to 93.4 pct in 2008, 92.2 pct in 2009 and 91.9 pct in 2010. Greek unemployment is forecast to rise to 9.0 pct in 2008 (7.6 pct in the Eurozone and 7.0 pct in the EU-27), rising to 9.2 pct in 2009 (8.4 pct and 7.8 pct in the Eurozone and in the EU-27) and to 9.3 pct in 2010 (8.7 pct and 8.1 pct, respectively). The EU executive also forecast that Greek inflation would rise from 3.0 pct in 2007 to 4.4 pct in 2008 and to fall to 3.5 pct in 2009 and 3.3 pct in 2010). European Union economic growth should be 1.4% in 2008, half what it was in 2007, and drop even more sharply in 2009 to 0.2% before recovering gradually to 1.1% in 2010 (1.2%, 0.1% and 0.9%, respectively, for the euro area).

The Commissions autumn forecasts show that the EU economies are strongly affected by the financial crisis, which is aggravating housing-market correction in several economies at a time when external demand is fading rapidly. While the important measures taken to stabilise financial markets have begun to restore confidence, the situation remains precarious and the risks to the forecasts significant. As a result, employment is set to increase only marginally in 2009-2010, after the 6 million new jobs created in 2007-2008, and unemployment is expected to rise by about 1 pp. over the forecast period after being at its lowest for more than a decade.

More positively, inflationary pressures are diminishing as oil prices fall, and the risks of second-round effects fade away. After reaching the best position since 2000, the overall budgetary position is also set to deteriorate while the rescue packages could raise public debt. The economic horizon has now significantly darkened as the European Union economy is hit by the financial crisis that deepened during the autumn and is taking a toll on business and consumer confidence. Emerging economies are holding up better than the EU and the US, so far, but even they are unlikely to escape unscathed.

We need a coordinated action at the EU level to support the economy similar to what we have done for the financial sector. The Commission last week set out a framework for recovery that aims to boost investment, sustain employment and demand. We are looking forward to hearing Member States views and, especially, for a joint approach at the EU level , said Joaquin Almunia, Economic and Monetary Affairs Commissioner. The Commission’s economic forecast projects EU economic growth to drop sharply to 1.4% in 2008. It was 2.9% in 2007. In 2009 the EU economy is expected to grind to a stand-still at 0.2% before recovering to 1.1% in 2010. The equivalent figures for the euro area for the period are 1.2%, 0.1% and 0.9%. In 2007 it was 2.7%.