A prediction of collapsing economic growth across Europe from the European Commission yesterday threatened to ratchet up the eurozone sovereign debt crisis to a new level.
Warning that a "deep and prolonged recession" across the continent could not be ruled out, the European Union's executive body slashed its 2012 forecasts for growth across the single currency area from 1.8 per cent to 0.5 per cent. Economists pointed out that a drop in growth, particularly in the troubled nations of the eurozone periphery, would make it still more difficult for policymakers to hold the single currency together.
"Growth has stalled in Europe and there is a risk of a new recession," said the commission's economic chief, Olli Rehn, unveiling the report. He also warned that unemployment across Europe would remain high throughout next year.
The European Commission's twice-yearly economic report forecasts that growth in Italy next year will slump to just 0.1 per cent. It predicts that the Greek economy will contract by 2.8 per cent and the Portuguese economy by 3 per cent.
Germany, Spain and France are predicted to register growth of just 0.8 per cent, 0.7 per cent and 0.6 per cent respectively. Portuguese unemployment is projected to rise to 14 per cent. And the jobless rate in Greece is expected to hit 18.4 per cent, well above the commission's previous forecast of 15.3 per cent.
