Finance ministers from the eurozone countries met on Monday as the financial crisis plunged European economy into recession.

An economic forecast released by the European Commission earlier Monday showed the combined economy of the 15 nations that use the euro is already in a recession, while the whole European Union (EU) is set to follow in the latter half of this year, making it urgent for the finance ministers to act on the real economy.

"The economic horizon has now significantly darkened as the EU economy is hit by the financial crisis that deepened during the autumn and is taking a toll on business and consumer confidence," said EU Economic Affairs Commissioner Joaquin Almunia when presenting his twice-yearly economic forecast.

"We need a coordinated action at the EU level to support the economy similar to what we have done for the financial sector," he said ahead of the meeting of eurozone finance ministers, who would be joined by their counterparts from other EU member states on Tuesday.

The commission estimated the eurozone economy fell by 0.1 percent in the third quarter of 2008 and will again shrink by 0.1 percent quarter-on-quarter in the fourth quarter after a 0.2 percent contraction in the second quarter, and the EU economy will contract 0.1 percent in the last two quarters of 2008.

In technical terms, recession is broadly defined as negative growths in two consecutive quarters.

Due to the ongoing financial crisis, the worst for generations, both the eurozone and the EU economy is expected to grind to a halt in 2009 and only start picking up in 2010.

In 2009 the eurozone economy will grow at merely 0.1 percent before recovering to 0.9 percent in 2010, while EU economy at 0.2 percent this year before 1.1 percent in 2010, according to the forecast.

Among large EU member states, Britain, a big victim of the financial crisis, is facing a deep recession, with its economy set to contract by 1.0 percent in 2009. Germany, France and Italy all will see a zero growth.

"I would encourage member states' finance ministers to adopt a clear position (on common EU action) because I am convinced we need common action to help the recovery in the second half of 2009," Almunia said.

"National action is needed and national action is much more efficient when it is coordinated with a common vision and with a common discussion on who, when and how should strengthen investment or fiscal policy and structural reforms," he added.

French Finance Minister Christine Lagarde, whose country holds the EU rotating presidency, said she will push for a Europe-wide plan to support the European economy.

But Luxembourg Prime Minister Jean-Claude Juncker, who chairs the meeting of the eurozone finance ministers, downplayed France's move, saying the EU's budget rules do provide room for maneuver in confronting the economic slowdown.

The commission said last week it will propose a recovery package later this month to save the real economy from the impact of the financial crisis, which would be in essence a coordinated approach based on national measures.

An EU source said the finance ministers would unlikely work intensively on the stimulus plan this time and may come back to the issue in December.

Instead, high on the agenda was the upcoming G20 summit on reform of the global financial system in Washington on Nov. 15.

A French official said the monthly gatherings of EU finance ministers were meant to prepare for an informal EU summit later this week where EU leaders would hammer out a common position in the Washington summit.

"The ministers of finance would be preparing for these two summits," the official said.

In a document prepared for discussion by the finance ministers, the French presidency proposed for reform of international financial institutions, notably the International Monetary Fund (IMF) and the World Bank, to improve supervision and monitoring of global financial markets.

The document said emerging economies such as China and India should be given more say in the Group of Eight (G8) industrialized countries, a rich countries' club which dominates the IMF and other international financial institutions.

It called for rapid establishment of supervisory colleges to oversight cross-border banks, adoption of codes of conduct to prevent excessive risk taking in the financial sector and tougher regulation of credit rating agencies.

EU finance ministers were also expected to agree on an urgent financial assistance to Hungary, amounting to 6.5 billion euros (some 8.3 billion U.S. dollars).

(Xinhua News Agency November 4, 2008)