Top EU economic official says downside risks bigger

BRUSSELS, March 3 (Chinese media) -- The European Union (EU) economy is facing bigger downside risks as the economic crisis deepens, a top EU economic official said on Tuesday, indicating governments may seek second stimulus packages.

"When we presented the forecasts on Jan. 19, I said the risks are broadly balanced," EU Economic and Monetary Affairs Commissioner Joaquin Almunia said at the European Policy Centre, a Brussels-based think-tank.

"Now I can say downside risks are bigger," he said.

The European Commission forecast on Jan. 19 that the eurozone economy will contract by 1.9 percent this year due to the financial crisis while that of the 27-nation EU will shrink by 1.8 percent.

Following financial bailouts and fiscal stimulus packages worth billions of euros to EU countries, there is still no sign of recovery around the corner. The economic situations in Central and Eastern European countries have actually worsened recently, arousing concern that a second wave of the financial crisis may break out in the region and there would be no escape for the whole EU.

Acknowledging big risks remained in some Central and Eastern European countries, Almunia said it was too early to assess the effectiveness of the stimulus packages.

"The effects of the stimulus cannot be estimated today," he said. "It's too soon."

He suggested that if the current stimulus packages fail to pull the economy out of the deep recession, EU governments may need to consider expansion of their efforts.

In the euro zone, some countries have also come under difficulty after their budget deficits were significantly pushed up by spending in financial bailouts and fiscal stimulus packages.

Almunia said the EU has a solution for any euro zone country in crisis before going to the International Monetary Fund (IMF) for help.

"If the crisis emerges in one euro-area country, there is a solution," Almunia said. "There is a solution before visiting the IMF."

But he declined to elaborate, saying "it is not clever to talk in public about this solution, but the solution exists."