The economic recovery in the euro area faces three major risks

The European Commission published on 14 October, the latest projections show that in the financial crisis suffered by the euro area economy in the third quarter of this year out of the recession. Although the euro area economy is expected to advance to step on the road to recovery, but the front is full of uncertainty. Financial industry vulnerable, unemployment and government debt will be the economic recovery in the euro area faces three risks.

According to the European Commission's forecasts, the euro area economy in five consecutive quarters of negative growth than a ring, the third quarter of this year is expected to be "positive", ring 0.2% compared to the fourth quarter, the economy will be incremental 0.1%. Visible, the momentum of the recovery in the euro area is not very strong.

The euro area economy because of the continuing turmoil in financial markets and in the second quarter last year, followed by malice, and raises awareness of the euro area economy could be plunged into a lasting, deep recession worries. While the euro area economy was able to advance out of the recession, thanks to Member Governments have invested heavily to rescue the financial industry and stimulate economic growth. To some extent, the euro area, economic recovery is money "heap".

Because timely assistance from the Government, a number of euro area financial institutions out of bankruptcy and reorganization in a new life. Now, once troubled financial markets started to stabilize, credit crunch situation eased, but as the instigator of the crisis in the financial industry is still fragile, particularly the face substantial threats of bad debts.

According to the European Central Bank by the end of 2010, the euro area banks assets down scale will reach 6490 billion euros, and the present report the size of assets down to 3650 billion euros only. How to deal with these "toxic" assets in relation to the euro area financial markets next stability.

Currently, most makers headache than financial institutions are unwilling to lend to the real economy sector. While Governments and central banks to the financial system into a large amount of liquidity, but financial institutions because of fear and loss, tightened up to corporate and personal lending conditions, resulting in the real economy sector is still suffering from the credit crunch, which dragged down economic recovery.

Analysts warned that if the economic situation is not promptly changed, some in debt of households and non-financial enterprises will face a more severe challenges, this will result in the loss of the Bank to further expand, increase financial institutions but credit situation and to form a vicious cycle.

Secondly, the euro area has become increasingly severe employment situation will be the economic recovery of the second big risks, and its hazards typically have lagged.

Eurostat published 14 preliminary data show that in the second quarter of this year the euro area employment decline than the then Central 0.5%, equivalent to new unemployed 70.2 million. As of July this year, the euro area unemployment rate has risen to 9.5%, since May 1999.

The European Commission responsible for economic and Monetary Affairs Committee member Joaquin · Almunia in today's news conference that the economic crisis for the effects of the labour market generally lag three quarter, this means that the employment situation in the euro area will continue to deteriorate.

Rising unemployment will suppress personal consumption, making the economic recovery loss of an important "engine". In addition, because consumption declining relative surplus production, coupled with the real economy sector is still suffering from the credit crunch, the enterprise investment may be inhibited. The European Commission acknowledges that not exclude rising unemployment and economic decline in the formation of the vicious circle of possible.

Finally, due to expend in response to the financial and economic crisis, euro area countries the general deterioration of the financial situation, significant increase in the deficit level. If handled inappropriately, will threaten financial stability in the medium and long term, the impact of the euro area's growth potential in the future.

In accordance with the European Commission's view, the euro area economy in the wake of the financial crisis after baptism, is currently turning point, there is every reason to feel optimistic about short-term economic prospects. But despite the signs of recovery are possible at first, but it can last long and I have to wait.