Three of Europe's leading economic institutes today lowered their economic growth forecasts for the eurozone. Germany's Ifo Institute, France's Insee, and Italy's Istat all predict now that the single currency union will enter a recession in the third quarter of 2012 and stay there until next Spring.
The three also expect inflation to remain above the European Central Bank's (ECB) target rate of 2% or less for the rest of this year. That estimate is inline with comments made yesterday by ECB chief Mario Draghi.
In July the three economic institutes had forecast third-quarter GDP contraction of 0.1% in the eurozone. They have now lowered the estimate to 0.2% and expect an additional contraction of 0.1% in the fourth quarter. The first quarter of 2013 will remain unchanged from the fourth quarter.
The blame is laid on "a continuing downward pressure on domestic demand" which has been caused by "intensified austerity measures in several member states." The institutes also point to a high level of economic uncertainty for their lowered estimate.