The EU Commission says the eurozone is due to shrink this year as Europe's southern periphery continues to suffer from the debt crisis. But there should be "modest growth" later in the year.
The eurozone economy will continue to contract into mid-year, shrinking by an expected 0.3 percent in 2012, the EU Commission said Thursday. The new figures came in spite of previous forecasts that saw the economy growing by 0.5 percent.
"The unexpected stalling of the recovery in late 2011 is set to extend into the first two quarters of 2012," EU Economy Commissioner Olli Rehn told a news conference in Brussels.
In its 2012 growth forecast, the EU Commission put the figure into context by comparing it to overall global growth, which was "less supportive," declining to 4.3 percent, and "weighing on net exports."
However, Rehn also said that there are "signs of stabilization" in the eurozone as "stress in financial markets is easing."
Periphery burdens
In efforts to make its forecast more accurate, the EU Commission for the first time used data from all 27 EU states and not just from the seven biggest countries.
Germany and France - the eurozone's biggest economies - are predicted to grow by 0.6 percent and 0.4 percent respectively.
For Greece, however, the figures were nearly twice as bad as predicted in the last EU growth estimate made in November. The Greek economy is now seen shrinking by 4.4 percent in 2012 rather than 2.8 percent.
Italy too would face a recession, the report said, with its economic output shrinking by 1.3 percent in 2012.
Spain's economy is expected to contract by one percent this year, against the 0.7 percent growth the commission forecast in November.
Nevertheless, Olli Rehn said that "modest growth" would return in the second half of the year. Inflation would fall to 2.1 percent across the euro currency area, down from 2.7 percent in 2011.
Author: Uwe Hessler (AFP, AP, dpa)
Editor: Simon Bone
Editor: Simon Bone
- Date 23.02.2012
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