EC Warns Eurozone Recession Will Extend into 2013

The European Commission (EC), which last November predicted that the eurozone’s 17 member countries would edge back into 0.1% economic growth this year, said it now expects the recession to extend into 2013 with a -0.3% contraction following the -0.6% shrinkage in 2012.

However, the EC remains more optimistic in its winter economic forecast on prospects for 2014 when it expects the eurozone to recover and achieve 1.4% growth.

For this year, the EC has downgraded Europe’s two biggest economies and is now pencilling in 0.5% growth for Germany’s economy and a minimal 0.1% increase for France. However, its projection sees this being undermined by a -1% contraction for Italy and -1.4% for Spain.

The Greek economy will see its sixth year of economic contraction, after figures of -7.1% in 2011 and -6.4% last year. The EC, which last November was forecasting a -4.2% contraction for Greece in 2013, now expects the figure to be -4.4%

Unemployment in the eurozone is also expected to rise, from 11.4% in 2012 to 12.2%, which would take the jobless total to more than 20 million. The Greek jobless rate is projected as increasing from 24.7% to 27%, while Spain will be close behind at 26.9%.

“The weakness of economic activity towards the end of 2012 implies a low starting point for the current year,” said Olli Rehn, the European Union’s economic affairs commissioner, in a statement. “The current situation can summarised like this: we have disappointing hard data from the end of last year, some more encouraging soft data in the recent past and growing investor confidence in the future.”

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