Euro-zone in technical recession

The EU Commission has substantially revised down its GDP forecasts compared to the spring forecasts. In the autumn forecasts the Commission expects euro-area GDP growth of 1.2% this year (down from 1.8%), 0.1% next year (down from 1.6%) and forecasts growth of 0.9% next year.
The Commission expects a “rapid fall in inflation”, forecasting inflation rates of 2.2% for next year and 2.1% for 2010. The downward revision of the October flash manufacturing PMI from 41.3 to 41.1, a new record low and down 3.9 points M/M, is a powerful reminder that the euro area is already in recession.
Citibank economists say the below-consensus forecasts look too optimistic; Citi economists forecast GDP growth of 1.1% this year, a contraction by 0.2% in 2009 and weak growth of 0.7% in 2010.
In expecting a contraction in 3Q GDP, the EU Commission projects a technical recession in the euro area and forecasts stagnation in economic activity next year. These projections are based on the assumption that the exchange rate of the EUR against the USD is 1.48 in 2008 and 1.36 in 2009 and 2010.
Meanwhile Luxembourg Prime Minister Jean-Claude Juncker said that the European Union's budget rules do provide room for manoeuvre in confronting the economic slowdown, while admitting that the euro-zone is likely to experience a technical recession.
A technical recession consists of two consecutive quarters of economic contraction.
The French government is pushing for an EU-wide fiscal stimulus package to limit the scale of the slowdown. But Juncker said he doesn't favour such a move. He added that the rules that govern how much EU governments can borrow "do provide answers to the situation we are experiencing."