20 January,2009 02:07 PM IST | | AFP
The EU economy will shrink nearly 2.0 per cent this year as one of the worst recessions on record drives unemployment and government deficits to levels not seen for years, the European Commission forecast today.
After growing 1.0 per cent in 2008, the 27-nation economy of the European Union is poised to contract by 1.8 per cent this year, the EU's executive arm said in a dramatic downward revision of its forecasts.
Predicting that the roots of recovery will only take hold in the middle of the year, the commission forecast that the EU would achieve economic growth of just 0.5 per cent in 2010.
The outlook was marginally worse for the 16 countries sharing the euro, which the commission forecast would see their combined economy shrink 1.9 per cent this year after growing 0.9 per cent in 2008.
The forecast marked a severe downward revision from the commission's last estimate in November, when it predicted the eurozone economy would eke out growth of 0.1 per cent.
With the economy suffering from a 9.2 per cent drop in business investment this year, it too would only begin picking up in the middle of the year before managing to grow 0.4 percent in 2010.
At the same time, unemployment will climb to levels not seen in Europe for over a decade as joblessness becomes once again a major headache for workers and politicians.
The commission forecast that the eurozone jobless rate would rise from 7.5 per cent in 2008 to 9.3 per cent this year and hit 10.2 per cent in 2010 -- over the 10 per cent mark for the first time since 1998.
