The crisis-battered eurozone faces an extended recession, with its gross domestic product (GDP) expected to contract this year by 0.3 per cent, the European Commission said Friday, discarding previous growth predictions.
"The ongoing rebalancing of the European economy is continuing to weigh on growth in the short term," Olli Rehn, the European Union's economy commissioner, noted in a statement.
Three months ago, the EU's executive had still been predicting that the eurozone GDP would grow by 0.1 per cent this year.
The commission's winter forecast also delivered grim deficit news for France and Spain, the second and fourth-largest economies in the 17-member currency bloc.
The prognosis for the overall deficit in the eurozone slightly worsened too, with the commission now expecting it to be 2.8 per cent this year and 2.7 per cent in 2014.
EU member states are all mandated to eventually bring their deficits below 3 per cent of GDP, with sanctions at the disposal of the bloc if they do not comply.
Madrid had been tasked with slashing its deficit to 6.3 per cent of GDP last year, 4.5 per cent this year and 2.8 per cent in 2014. Instead, the shortfall reached 10.2 per cent last year and is on track to hit 7.2 per cent in 2014, the commission said.
But Rehn has insisted in the past that hitting targets is not the only priority, with the sustainability of public finances also key.
Spain has thus been granted reprieves before in the form of softer deficit targets and an extra year to hit the 3-per-cent goal, given its struggle with a recession and a banking crisis.
France, the second-largest economy in the 17-member currency bloc, already acknowledged this week that it too would miss its deficit goal, blaming slower-than-expected growth.
The administration of President Francois Hollande had still insisted last year that the country could meet its deficit target of 3 per cent in 2013, despite widespread scepticism among experts.
The commission now expects the French shortfall to reach 3.7 per cent this year and 3.9 per cent in 2014 unless new policies are implemented. The country will register barely any growth this year at 0.1 per cent, the commission said.
That leaves an ever-widening gap between France and the eurozone's economic powerhouse, Germany. It is expected to post a 0.5 per cent GDP increase this year, followed by 2 per cent in 2014 - compared to 1.2 per cent in France.
The eurozone's other large economies are all expected to see their economies contract this year - by 1 per cent in Italy and 1.4 per cent in Spain.
The currency bloc's bleak economic outlook has led some observers to call for the EU to let up on the austerity measures it has pushed to combat the eurozone debt crisis.
But Rehn urged member states to keep heading down that path.
"The decisive policy action undertaken recently is paving the way for a return to recovery," he argued. "We must stay the course of reform and avoid any loss of momentum, which could undermine the turnaround in confidence that is underway."
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