Economic confidence in the euro zone dipped in October to its lowest level in 16 years, a survey from the European Commission showed Thursday.
The economic sentiment indicator in the 15-nation bloc sharing the euro fell by 7.1 points to 80.4 in October, a record low level since 1993. It was also the sharpest drop during a month since the survey started in January 1985.
In the 27-nation European Union (EU), the monthly indicator, based on business and consumer surveys, also recorded its largest month-on-month decline ever, hitting its lowest level since 1993, down by 7.4 points to 77.5.
The surveys are conducted in different sectors of the economy, namely industry, services, construction and retail trade as well as among consumers.
In both the euro zone and the EU, confidence fell considerably across all sectors.
Consumer confidence reached its lowest level in close to 15 years. The services' confidence indicator recorded its lowest level since the introduction of the survey 12 years ago. Both the industry and construction confidence indicators slipped significantly in October.
All EU countries reported a fall in economic confidence. Among the large member states, confidence deteriorated most markedly in the Netherlands, down by 11.3 points, followed by France, Italy and Britain, down by 6.5, 6.1 and 5.7 points respectively.
Economic confidence in Germany, the largest economy in the EU, registered a below-average drop of 4.8 points in October.
The Commission surveys also showed employment expectations among managers in EU industry and services continued to worsen. In addition, consumers expected a further increase in unemployment, which means they would be more reluctant to spend for fear of uncertainty in the future.
The financial services confidence indicator, which is not included in the economic sentiment indicator, decreased significantly in both the EU and the euro zone, to reach its lowest level since the launch of the survey in 2006.
Weakening confidence intensified widespread concern that the euro zone economy is on the verge of recession due to the financial crisis.
Meanwhile, the business climate indicator (BCI) for the euro zone decreased further in October to values last observed in 2001,the Commission said in a separate survey.
"The low level of the indicator suggests that industrial activity remains subdued," the Commission said.
All five underlying components of the BCI declined. The decline was fairly sharp for managers' production expectations and assessments of total order books and export order books, while their view of stocks of finished products and the production trend observed in recent months worsened less.
EU Economic and Monetary Affairs Commissioner Joaquin Almunia warned Wednesday that the EU is now not only facing a financial crisis, but a mounting threat to the real economy.
"We are now facing not only a financial crisis but a serious slowdown in our economies that is hitting households, businesses and jobs," he said, in a warning now confirmed by the Commission's surveys.
In a bid to prevent the financial crisis evolving into an economic crisis, the Commission said Wednesday it will present late November an economic recovery plan with targeted short-term measures to stimulate the economy.
"We will bring forward, on Nov. 26, a comprehensive EU recovery plan, based on the framework we have approved today," the Commission President Jose Manuel Barroso told a press conference in Brussels.
In a four-pronged approach, the Commission called for measures to help families and households across Europe, coordination and solidarity among member states, full use of flexibility allowed by EU rules and global governance.
Also Wednesday, the Commission signaled its readiness to support the auto industry in meeting stricter CO2 emissions targets in the face of the financial crisis and sharp economic slowdown.
In addition, Almunia made a proposal to raise the maximum EU aid to member states facing financing trouble to 25 billion euros (33 billion U.S. dollars) after EU governments agreed to lend Hungary 6.5 billion euros (8.5 billion dollars) in a joint bid with the International Monetary Fund (IMF) to help the country deal with its economic woes arising from the global financial crisis.
Under current rules, the EU can only provide as much as 12 billion euros (16 billion dollars) in the form of a so-called medium-term financial assistance facility to help non-euro member states stabilize their economies.
The aid to Hungary trimmed the facility to merely 5.5 billion euros (7.2 billion dollars).
Hungary is so far the only EU member state to seek international aid, but other member states, mostly in Central and Eastern Europe, are also facing a difficult time due to less inflow of foreign capital.
"We know some other members of the EU are under stress in the financial markets and we are ready to act," Almunia said.
Source:Xinhua
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