EC Forecasts Only Modest Recovery for Eurozone

Eurozone unemployment will remain close to record high levels in 2014 and 2015, while economic growth will be only modest according to the autumn statement issued by the European Commission (EC).

The Commission forecast that the economy of the 18 countries sharing the euro from next year will grow by 1.1% in 2014 and move upwards to 1.7% in 2015 after a -0.4%  contraction this year.

The previous EC forecast in May anticipated slightly stronger eurozone growth of 1.2% for 2014. Nonetheless, the region has moved out of recession and the pace of recovery will slowly accelerate quarter-on-quarter. All European Union (EU) countries except Cyprus and Slovenia will see their economies grow with Germany, Europe’s biggest economy, expanding by 1.7% and France, the second biggest, by 0.9%.

The Commission also expects unemployment in the eurozone to remain around 12.2% until 2015, when it is forecast to ease to 11.8%. Official figures last week revealed that unemployment remained at 12.2% in September, signaling that the region’s recent move out of recession has yet to filter through to the jobs market.

“There are increasing signs that the European economy has reached a turning point,” said the EU’s economic and monetary affairs commissioner, Olli Rehn. “The fiscal consolidation and structural reforms undertaken in Europe have created the basis for recovery.

“As the two largest eurozone economies, Germany and France together hold the key to stronger growth and employment in Europe. If [they] together implement what EU leaders have recommended, they will do a great service to the entire eurozone and its growth and employment,” he said, referring to boosting domestic demand in Germany and fiscal consolidation, lower labour costs and more competition in services in France.

Eurozone inflation, which the European Central Bank (ECB) aims to keep below, but close to 2% over the next two years, will be 1.5% this year and next and 1.4% in 2015, reflecting the slow recovery and continuing high unemployment.

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