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European economy still deep in recession

(Xinhua)
Updated: 2009-04-26 10:30

BRUSSELS -- Economic data released recently showed that Europe is still deep in economic recession, but some signs of recovery have been spotted.

Industrial new orders fell in the 16-nation euro zone in February by 0.6 percent month-on-month, and by 34.5 percent year--on-year, European Union's statistics agency Eurostat said on Thursday.

The fall, for the seventh month in a row, indicated that export, one of the vital driving forces to Europe's economic growth, was not gaining steam yet.

Current account deficit in the 27-nation EU in the final quarters of 2008 widened over the same period a year ago though narrowed over the third quarter.

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Its external current account recorded a deficit of 57.3 billion euro (74.5 billion US dollars), compared with a deficit of 67.4 billion in the third quarter, and a deficit of 21.6 billion euros in the same period in 2007, according to the second estimate of Eurostat.

In the period, the EU made direct investment abroad of 23.9 billion euros, compared with 171.9 billion in the fourth quarter of 2007, while foreign direct investors disinvested in the EU by 34.4 billion, compared with investment of 140.0 billion in the same quarter of 2007.

Portfolio investment recorded a net inflow of 370.1 billion euros compared with a net inflow of 8.3 billion in the same months of 2007.

Other investment, which includes currency and deposits, loans, trade credits, recorded a net outflow of 401.3 billion euros, compared with a net outflow of 37.4 billion euros in the same quarter of 2007.

Another report from Eurostat showed that public finances worsened in 2008 both in the euro zone and the EU as budget deficits and government debt rose drastically due to excessive spending to boost the economy and falling tax revenue amid the global financial crisis.

Compared with 2007, the government deficit to the gross domestic product (GDP) ratio in the euro zone rose from 0.6 percent to 1.9 percent in 2008. It climbed from 0.8 percent to 2.3percent in the EU.

Government debt to GDP ratio increased from 66.0 percent at the end of 2007 to 69.3 percent in the euro zone, while it surged from58.7 percent in the EU to 61.5 percent.

Twenty-one EU member states saw, compared with 2007, a worsening government deficit.

The government expenditure ratio increased, while the government revenue ratio dropped.

Public spending in the euro area last year was equivalent to 46.6 percent of GDP, while revenue was equal to 44.7 percent. The figures for the EU were 46.8 percent and 44.5 percent, respectively.

Despite the dark picture of the European economy, traces of improving were also seen.

The 0.6-percent fall of industrial new orders in February was greatly narrowed compared with January's 2 percent.

The purchasing managers' index, which indicates future activity in services and manufacturing, rose from 38.3 to 40.5 points in March, exceeding an expected 39 points and showing the rate of economic contraction has slowed down.