City A.M. Reporter
EUROPE’S economy will rebound next year from a deep slump and accelerate in 2011, the European Commission said yesterday, paving the way for major budget deficit cuts across the 27-nation bloc from 2011 at the latest.<br /><br />Brussels cut its forecast for the UK economy in 2009 but said that growth in 2010 and 2011 would beat that of the eurozone, as it revised upwards many of its predictions.<br /><br />The Commission said the UK?would shrink by 4.6 per cent this year before growing by 0.9 per cent next year. This is better than the 0.1 per cent growth it was previously predicting and would be better than the 0.7 per cent it is pencilling in for the eurozone over the same period. <br /><br />In 2011, the UK?will grow by 1.9 per cent, against 1.5 per cent in the eurozone. The Commission forecast that the EU economy as a whole would expand by 0.7 per cent in 2010 and 1.6 per cent in 2011 after a contraction of 4.1 per cent this year.<br /><br />EU finance ministers have agreed that if the Commission forecasts showed the recovery was strengthening and self-sustaining, deficit cuts in all EU countries should start in 2011 at the latest.<br /><br />“With this forecast I will recommend to EU finance ministers next week to declare or confirm that 2011 is the year when the EU and euro area start in aggregate terms this fiscal exit strategy,” Economic and Monetary Affairs Commissioner Joaquin Almunia said at a news conference.<br /><br />Almunia said the economy was coming out of recession thanks to government and central bank support measures. He also said banks had to be repaired to make the recovery sustainable.<br /><br />Meanwhile, the Commission warned of an “extraordinary deterioration” in the state of the UK’s public finances, compounded by the second phase of the bank sector rescue. <br /><br />It said Britain’s debt would likely double between 2007 and 2011 – an increase only exceeded in the EU?by Ireland and Latvia. <br /><br />According to the Commission, UK public debt as a proportion of GDP will be 88.2 per cent in 2011, compared to 44.2 per cent currently. And it said the country should have entered the slump with better finances.