Major EU economies risk sliding into recession

Updated: 2012-01-18 06:49


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GENEVA - Financial woes across the European Union (EU) countries have shaken regional economy and raised the chances of the bloc's major economies entering into recession, a United Nation report said on Tuesday.

The annual UN World Economic Situation and Prospects report predicts that growth for EU will be only 0.7 percent in 2012, substantially lower the 1.6 percent made in 2011.

However, the UN report argues, if the downside risks come true, as a result of the economic tightening, the EU economic might contract by 1.6 percent in 2012, with most countries, including France, Germany, and Britain, sliding into recession.

"The developed economies are on the brink of a downward spiral enacted by four weaknesses that mutually reinforce each other: sovereign debt distress, fragile banking sectors, weak aggregated demand and policy paralysis caused by political gridlock and institutional deficiencies," the report says.

The report also notices that similar pattern in economic indicators occurred in 2011 as has registered prior to the 2008-2009 recession, a worrying sign meaning that the brunt of the slowdown will be felt in the final quarter of 2011 and the beginning of 2012.