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Eurozone in 'mild recession,' EU says

Feb 23, 2012, 10:22 GMT

Olli Rehn (R), Monetary Affairs European Commissioner and his press officer Amadeu Altafaj Tardio (L) give news conference on EU Interim Economic Forecast at the EU headquarters in Brussels, Belgium, 23 February 2012. EPA/OLIVIER HOSLET

Brussels - The eurozone is in a 'mild recession' but there are signs of 'stabilization,' the European Union executive said Thursday as it published revised gross domestic product (GDP) estimates predicting a contraction of 0.3 per cent in 2012.

According to the European Commission in Brussels, GDP growth for the 27-member EU will remain flat this year.

The commission's previous economic forecast, published in November, predicted that the eurozone would grow by 0.5 per cent and the EU by 0.6 per cent.

'Although growth has stalled ... stress in financial markets is easing,' EU Economy Commissioner Olli Rehn said in a statement, alluding to falling market tensions around Spain and Italy.

The 2012 figures for Greece were almost twice as bad, with its GDP expected to contract by 4.4 per cent rather than the 2.8 per cent predicted in November.

The other eurozone countries with expected negative growth this year were Portugal (-3.3 per cent), Italy (-1.3 per cent), Spain (-1 per cent), the Netherlands (-0.9 per cent), Cyprus (-0.5 per cent), Belgium and Slovenia (both -0.1 per cent).

Germany and France - the currency bloc's biggest economies - were predicted to grow respectively by 0.6 per cent and 0.4 per cent.

Among non-eurozone economies, Britain was forecast to grow by 0.6 per cent and Poland by 2.5 per cent - the best result across the bloc. Hungary, which is seeking an EU-International Monetary Fund loan, was expected to contract by 0.1 per cent.

The EU executive also said that inflation in the eurozone would fall to 2.1 per cent, down from 2.7 per cent in 2011. Average inflation in the EU was expected to drop from 3.1 per cent to 2.3 per cent.