EU Monetary Affairs Commissioner Joaquin Almunia today refused to rule out further downgrades to the European economic outlook, warning of deepening risks from the global downturn.
On January 19, the European Commission estimated that the euro zone economy would shrink by 1.9% this year while the 27-nation European Union would see a contraction on the order of 1.8%.
It forecast that Europe would return to growth in 2010 with economic expansion of 0.4% among the 16 countries using the euro single currency, and 0.5% in the EU.
Almunia also held out the possibility that EU governments might have to ramp up their economic stimulus plans if existing packages fail to snap Europe out of an increasingly dire recession.
European governments are ploughing hundreds of billions of euros into their economies in hope of reviving activity, but economic data keep going from bad to worse while their budget deficits balloon in the meantime.
Concerns are growing about how to finance the widening gap between government revenues and spending.
One of the most radical ideas in Europe is for countries to issue bonds together as a group. While Italy has led calls for the issue of 'euro bonds', economic powerhouse Germany, which enjoys the lowest interest rates on its government debt, has poured cold water on the idea.
Almunia also dismissed lingering market concerns about the possibility that a member of the euro zone could be forced to leave the bloc if deficits get out of control.
