Growth prospects are being revised downwards, industrial production is shrinking and unemployment is likely to rise, says a new report from the WEF

The global financial crisis will have profound effects on Europe and its consequences on the real economy are still unfolding, according to a new report from the World Economic Forum (WEF).

As the Forum was preparing its Europe@Risk report, the financial crisis that began in 2007 reached a critical point. Banks on both sides of the Atlantic were bailed out and rescue plans for the financial sector were put in place all over Europe.

The report highlights that the contagion effects of the financial meltdown will affect the real economy of the region.

In Western Europe, growth prospects are being revised downwards, industrial production is decreasing in several countries and unemployment is likely to increase.

Irene Casanova, co-author of the report, said: ‘Confidence among lenders has dramatically decreased and, combined with liquidity drying up in the markets and high levels of uncertainty, the risks of entering a prolonged recession are growing.’

She added: ‘Although we cannot say the economic slowdown, energy considerations and demographic shifts will affect the countries of the region in exactly the same way, we do find that effective mitigation of related risks in these areas requires further collaboration between governments, businesses and other stakeholders.’

The report examines the global risks most pertinent to Europe, Russia, Eastern Europe, Turkey and Central Asia.

The report divides the key risks and trends into four broad categories:

1. Economic Slowdown: What are the effects of the global financial crisis on the region's real economy? What institutional adjustments are required to tackle the current economic slowdown?

2. Energy Security: How can the region manage the energy security challenges as demand grows? How can energy sustainability be improved in the region?

3. Demographic Shifts: How will governments manage the related fiscal pressures and reform systems to mitigate risks from changing demographics?

4. Education: How will the region's governments and companies find solutions and incentives to reform education systems and ensure workforces' skills correspond to the needs of employers?