The euro zone economy will contract by more than expected this year and budget deficits will decline more slowly, the European Commission said on Friday as it set out forecasts for the next two years.
France, Spain, Italy and the Netherlands – four of the five largest euro zone economies – will be in recession through 2013, the Commission’s forecasts showed, with only Germany, the largest euro zone economy, managing to eke out growth.
“In view of the protracted recession, we must do whatever it takes to overcome the unemployment crisis in Europe. The EU’s policy mix is focused on sustainable growth and job creation,” EU Economic and Monetary Affairs Commissioner Olli Rehn said.
“Fiscal consolidation is continuing, but its pace is slowing down. In parallel, structural reforms must be intensified to unlock growth in Europe.”
The Commission said the euro zone economy would shrink 0.4 percent this year and grow 1.2 percent next year, revising down its projections from last February of a 0.3 percent recession and 1.4 percent growth respectively.
The forecast is roughly in line with the mid-point of the -0.9 to -0.1 percent range forecast for 2013 by the ECB in March, and the 0.0 to 2.0 percent growth range seen for 2014.
Chosen excerpts by Job Market Monitor