-European Commission
European Union authorities decided to soften its demands for austerity measures, providing six members with more time to curb budget deficit back to the target level. France, Spain, Poland and Slovenia will have two more years to bring its budget deficit below 3% of gross domestic product, while such countries as the Netherlands and Portugal are having their timetables extended by one year. Even Europe's largest economy, Germany, was allowed to increase wages and provide more flexibility in the labour market in order to improve competitiveness. Governments across the 27-nation European Union were pushed to cut government spending and raise taxes over the past three years, however these austerity measures have only pushed Europe back into recession.
The 17-nation economy is falling deeper into recession, as the economic output shrank 0.2% in the first quarter of this year, recording a sixth consecutive quarter of contraction. Moreover, it is widely expected that the Eurozone economy will register a negative growth for 2013 as a whole. As the slowdown has spread even to the Euro core, policy makers are now facing more pressure to introduce bold measures to boost growth. During the last policy meeting the ECB cut its benchmark interest rate to a record low of 0.5% and mentioned that another rate cut is possible if the economy continues to contract.
© Dukascopy Bank SA