Spain, Germany and the UK to feel the chill winds of recession

The European Commission has produced a pessimistic economic forecast which predicts that three of Europe’s biggest economies will fall into technical recession during 2008.

Spain’s economic pain is sharpened by a property slump in a sector that accounts for a disproportionate share of her GDP. Germany - for many years one of the world’s biggest exporters - is being affected by the wider global economic slowdown, an example of how events in other regions can have a direct effect on the growth of key export markets.

The UK too is not immune to a weakening of demand in export markets and also from the fall-out from a sharp correction in house prices and a collapse (there is no other word for it) in consumer sentiment. I have written in the past that a lower pound ought to provide a welcome support for the domestic economy by boosting the competitiveness of the UK export industries, But the timing of the recent sterling depreciation seems to be working against us right now. Our export prices are become more favourable but at the same time, global demand is slowing down and the result is a thin but hardly significant improvement in our trade deficit.

There are twenty seven (27) member nations of the European Union but the lion’s share of European GDP comes from just a handful of nations - France, Germany, Italy, the Netherlands, Poland, Spain and the United Kingdom, together account for about 80% of the EU’s GDP.

Here is the excellent Hugh Pym reporting on the EU’s economic forecast