($EURUSD, $MACRO) EU Cuts Euro-Area Second-Half Growth Forecasts on Debt Crisis

Sept. 15 (Bloomberg) -- The European Union cut itsquarterly growth forecasts for the second half of the year“considerably” to reflect a worsening outlook from thesovereign-debt crisis.     The 17-nation euro region will expand 0.2 percent in thethird quarter and 0.1 percent in the fourth, down from anestimate in March for 0.4 percent expansion in both periods, theEuropean Commission in Brussels said today. The growth outlookfor Germany, Europe’s biggest economy, was lowered to 0.4percent for the third quarter and 0.2 percent for the fourth,down from 0.5 percent for each quarter earlier. It forecast nogrowth for Italy in the second half.     “The outlook for the European economy has deteriorated,”Olli Rehn, EU economic and monetary affairs commissioner, saidin a statement. “The sovereign-debt crisis has worsened, andthe financial market turmoil is set to dampen the realeconomy.”     Group of Seven finance chiefs vowed on Sept. 9 to make a“concerted effort” to support growth as efforts to rein inbudget deficits curtail demand and increasing concerns aboutGreece’s ability to avoid a default roil financial markets.Exports from Germany, the region’s largest economy, declined inJuly while investors and executives grew more pessimistic lastmonth as the sovereign-debt crisis threatened to engulf Spainand Italy.                           German Growth      The commission forecast the euro region will expand 1.6percent this year, the same as it predicted in May. It raisedits forecast for annual German growth to 2.9 percent from 2.6percent. It forecasts 2.5 percent euro-area inflation this year,compared with a prediction of 2.6 percent in May.     The commission cut its 2011 forecast for Italy whilemaintaining its prediction for Spain, whose bond yields surgedto euro-era highs in August, prompting the European Central Bankto intervene to prop up the two countries’ bond markets. Italywill expand 0.7 percent compared with an earlier prediction of 1percent, and Spain will expand 0.8 percent.     In the third and fourth quarters, Italy will show nogrowth, and Spain will expand just 0.1 percent, according totoday’s report.     France’s economy, which stagnated in the second quarter,will grow 1.6 percent this year, down from 1.8 percent seen inMay, the commission said. The Netherlands will expand 1.7percent versus 1.9 percent, the Commission said. France willgrow 0.2 percent in each of the next two quarters, while theNetherlands will expand just 0.1 percent in each of them.     Central bankers see a “slowing down in comparison withwhat has been observed,” ECB President Jean-Claude Trichet saidon Sept. 12 after leading the Global Economy Meeting in Basel,Switzerland. The ECB cut its 2011 euro-area growth forecast onSept. 8 to 1.6 percent from 1.9 percent. It sees inflation at2.6 percent this year and 1.7 percent next, compared with thebank’s ceiling of 2 percent.