On the brink.....how positive!!!
THE European single currency area is on the verge of recession, Jean-Claude Juncker, president of the eurozone finance ministers said today.
"In the eurozone, we are on the brink of a recession, albeit a technical one," Mr Juncker told reporters after a meeting with recently appointed Belgian Prime Minister Elio di Rupo. "I think there's no alternative to budget consolidation."
The two leaders were meeting in Luxembourg, where Mr Juncker is Prime Minister, as part of an official tour by Mr di Rupo following the formation of his government after 541 days of political deadlock.
Mr Di Rupo said measures to tackle the crisis shouldn't just involve cutting spending.
"We mainly discussed European questions," he said. "Economic growth and job creation must go alongside budgetary restraint."
Mr Juncker said leaders would discuss raising the ceiling of the eurozone bailout fund in March, although he didn't give details of how much this could be increased.
"We haven't observed any difficulties on the market," since ratings firm Standard & Poor's downgraded the European Financial Stability Facility Monday, he said. "In any case, generally, one shouldn't pay too much attention to ratings agencies."
The comments come at a fraught time for the eurozone. The World Bank has revised downward its global growth forecast for 2012, including a worst case scenario involving the freezing of financial market access to up to four eurozone countries.
Mr Di Rupo said Belgium is ready to take additional measures on its budget, after it agreed to a spending freeze following a letter from the European Commission last week.
"We got Belgium out of the institutional difficulty," Mr Di Rupo said. "We'll re-examine the budget in February with new growth figures, we drew up the budget with a growth prediction of 0.8 per cent, it will be certainly lower, and we will take additional measures."
Mr Di Rupo and Mr Juncker will join leaders of all 27 EU member states in Brussels on January 30 at a summit to discuss the continent's sovereign debt crisis. They also both defended wage indexation, a process in Belgium and Luxembourg where salary increases are linked to inflation.
"The ECB, the European commission, don't really understand indexation," Mr Juncker said. "The social climate is a better as a result."
They also said a Belgium-Luxembourg summit would take place before the summer.