Recession fears deepen EU gloom

 

Fears of a new recession deepened Europe's economic gloom tonight with pressure mounting for firm decisions to restore the credibility of the single currency.

The announcement of a new - interim - leader to bring stability in Greece was matched by rising hopes of clarity in Italy, where Prime Minister Silvio Berlusconi, refusing to stand aside as promised until economic reforms are in place, may be gone this weekend.

In London Prime Minister David Cameron said Italy now posed a "clear and present danger" to the eurozone's future.

But claims that France and Germany were plotting a new "inner-core" of secure eurozone states were denied in Paris and Berlin.

Meanwhile today's coincidental Commission economic forecast delivered nothing to rally markets, with Economic and Monetary Affairs Commissioner Olli Rehn warning: "Growth has stalled in Europe, and there is a risk of a new recession."

Overall EU GDP (the combined national wealth of the 27 member states) is now projected to "stagnate" until well into 2012, with the Commission downgrading its growth forecast of 1.8% next year to just one half of one percent.

The only optimism was a projected return to "slow growth" of about 1.5% by 2013.

Mr Cameron repeated his call for eurozone leaders to act swiftly to save the single currency: "Italy is the third largest country in the eurozone.

"Its current state is a clear and present danger to the eurozone and the moment of truth is approaching.

"If the leaders of the eurozone want to save their currency then they - together with the institutions of the eurozone - must act now."

The Prime Minister warned: "The longer the delay, the greater the danger.

"Here in Britain, outside the euro, we must prepare for every eventuality - and that is exactly what we will do."

In Greece, former European Central Bank vice-president Lucas Papademos was installed as caretaker leader in an interim government whose urgent job is to approve the terms of more austerity measures in exchange for the latest slice of EU bail-out money to stave off bankruptcy for a few more months.

Greek elections are now likely in February, but the immediate political future remained unclear in Rome.

In Italy, President Giorgio Napolitano talked up the prospects of stability, insisting that the process of approving economic reforms demanded by Brussels could be completed in days instead of weeks.

Meanwhile Mr Berlusconi, who has pledged to resign, stays on, but Mr Napolitano said the reforms could be approved by the weekend.

That would clear the way for a new government, likely to be headed by former EU Commissioner and leading economist Mario Monti.

"Fears are totally unfounded that Italy may experience a long period of inactivity," insisted Mr Napolitano.

With debts of £1.6 trillion, Italy is considered too big for Europe to bail out, and high borrowing rates are making it tougher for the country to pay its way out of trouble.

European Commission President Jose Manuel Barroso led calls for the EU to "unite or face irrelevance".

He said the key was to deepen euro-area integration without creating divisions with those who are not yet in it.

If the euro area of the 17 single currency member states, or the entire 27-country EU, broke apart, he said, the estimated initial cost was up to 50% of EU GDP, with ongoing threats to the prosperity of the next generation.

Meanwhile Mr Cameron repeated that it is not in British interests for the eurozone to break up or for any countries in the eurozone club to leave:

"We have to keep the British economy safe, to take the British economy through this storm. That means preparing for all eventualities." he said.

PA

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Partner Manager - EMEA

£50000 - £100000 per annum: Recruitment Genius: A Partner Manager is required ...

Recruitment Genius: Regional Sales Manager - OTE £100,000

£45000 - £100000 per annum: Recruitment Genius: A Regional Sales Manager is re...

Recruitment Genius: IT Support Engineer

£18000 - £22000 per annum: Recruitment Genius: The company provides IT support...

Recruitment Genius: IT Manager

£45000 - £55000 per annum: Recruitment Genius: This manager is for a successfu...

Day In a Page

Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific