The eurozone recession will persist into 2013, the European Commission has conceded in its latest forecast.
Governments face an uphill battle to rein in their overspending, with Spain, France and Portugal all failing to cut their deficits to agreed targets.
Spain’s deficit, at 10.2% of GDP in 2012, was well above its 6.3% target, and would stay above target into 2014.
The eurozone economy would shrink 0.3% in 2013, the Commission said, making the governments’ task even harder.
Previously, the Commission had expected the 17 economies in the eurozone to collectively enjoy 0.1% positive growth this year. In 2012 the economy is estimated to have shrunk 0.6%.
Delivering its winter forecast, Commission Vice-President Olli Rehn said that unemployment across the single currency area expected to continue rising to 12.2% this year as the recession lingers. Last year’s jobless rate was 11.4%.
However, he said the eurozone was expected to rebound in the last three months of this year, registering 0.7% growth in the fourth quarter.
The forecast appears somewhat more pessimistic than the European Central Bank President Mario Draghi, who last month said he believed the eurozone would begin recovering in the second half of this year.
The Commission’s acknowledgement that the eurozone is in worse economic shape than previously mirrors a change in the International Monetary Fund’s thinking. The IMF said in January that it expected the eurozone to experience a “mild recession” in 2013, having previously predicted growth.
