Pessimism overshadows EU meeting

EUROPEAN Union finance ministers are likely to put on a brave front to mask growing private concerns about their stagnant economies when they meet in Brussels today.

Recent economic figures paint a bleak picture of lower consumer and business confidence, rising unemployment and wholesale corporate restructurings.

While a confident assessment of future economic conditions may emerge from their regular meeting, complete with predictions of a pickup in activity toward the end of this year, some experts say there remains an undercurrent of worry.

"The sense I get when I talk to people in private is that they are becoming more worried about the outlook," said one official.

"If you take a realistic view, you have to say this slowdown is protracted," he added.

The European Commission, normally unfazed by the hue and cry of gloomy pundits, conceded last week that growth in Europe would fall short of its earlier forecast. The Commission said it expects total output to grow by less than 2 per cent in 1996, down from an initial estimate of 2.6 per cent.

To a large extent, the revised outlook stems from a continued outpouring of dismal news from Germany, a country critical to Europe's economic fortunes.

Germany's unemployment rate climbed in February to its highest since 1945, standing at 11.1 per cent of the workforce compared with 10.8 per cent in January.

The dearth of jobs has in turn clearly harmed consumer confidence, which dipped sharply in February after showing signs of stability in January. The Commission's latest surveys of consumer and business opinion noted the decline in confidence was widespread, affecting nearly all of the EU's 15 members.

Within the industrial sector, companies across Europe reported falling orders in both domestic and foreign markets, the survey added.

For economic policy makers the steady stream of weak data has prompted greater opening of the monetary tap.

The central banks of Britain, France, Sweden and Denmark all lowered official short term interest rates this week.

Yet the question which continues to haunt financial markets and the prospects for renewed business activity is the future course of the Bundesbank's monetary policy.

The Bundesbank president, Dr Hans Tietmeyer, last Thursday offered a mixed evaluation. He emphasised the current downturn was not a recession but carefully left open the prospect of new rate cuts.

"I think out current situation should be described by the words pronounced `weakness' and not by `recession'... I don't think we're in a recession," he told reporters in Frankfurt.