The European Commission has cut its growth forecasts for the eurozone, indicating a deeper recession this year and a slower recovery next year.
In its Spring forecasts, the Commission said the bloc’s economy will likely shrink by 0.4 percent this year and should expand 1.2 percent next year.
Of the large countries only Germany, the world’s second biggest exporter, is set to grow this year – and that by just 0.4 percent.
If the rest of the world buys less, the region’s exporters suffer and exports are the only growth area in many eurozone countries. So Europe remains very much at the mercy of economic trade winds worldwide.
Olli Rehn, the EU’s Economic and Monetary Affairs Commissioner said: “In the near term, increasing external demand is set to be the main growth driver since domestic demand is still constrained in the aftermath of the deep financial crisis.”
Weak growth means no jobs as the bloc struggles through its second year of contraction and its second recession since 2009.
Unemployment this year is predicted to be 12.2 percent of the working population – a record 19 million people out of work in the eurozone.
Olli Rehn said: “We must do whatever it takes to overcome the unemployment crisis in Europe.”
More time for French deficit moves
The deeper recession means governments will not be able to cut their budget deficits as quickly as promised.
Responding to that, the Commission said France will be given two more years to get its budget gap below the three percent of gross domestic product target.
Others, including the Netherlands, Slovenia and non euro-zone Poland, are likely to get a year more to meet the European Union ceiling.
The formal decision will be announced on May 29, when the Commission will make macroeconomic recommendations.
“France badly needs to unlock its growth potential and create jobs.” Rehn said as he announced that Spain, Italy and the Netherlands as well as France – four of the euro zone’s five largest economies – would remain in recession this year.
The granting of more time is a victory for French President Francois Hollande, who won elections promising a focus on growth and less on austerity but has little to show for his economic policies after a year in office.