The eurozone economy will shrink more than expected this year, according to the European Commission which published its Spring Economic Forecast on Friday.
The Commission’s outlook also showed that 4 of the largest euro zone economies – France, Spain, Italy and the Netherlands – will be in recession throughout 2013. Only Germany’s economy will grow.
‘Annual GDP growth this year is now forecast to contract by 0.1% in the EU and by 0.4% in the euro area. For 2014, we expect growth of 1.4% in the EU and 1.2 % in the euro area’, said EU commissioner for Economic and Monetary Affairs Olli Rehn.
Unemployment remains one of the biggest concerns across the euro area, with an average rate of 12%. In countries such as Greece and Spain it is expected to hit 27% in the coming months.
EU commissioner Olli Rehn said that the ‘EU must do whatever it takes to overcome the unemployment crisis in Europe’.
‘Unemployment is forecast to reach 11% in the EU and 12% in the euro area in 2013. At the same time, differences across Member States remain large’, said EU commissioner for Economic and Monetary Affairs Olli Rehn. .
Just this Thursday, the European Central Bank cut interest rates for the first time in 10 months as a response to a drop in inflation below target and rising unemployment in the eurozone.
The cuts were widely expected after ECB president mario Draghi said last month that the bank was “ready to act if needed”.
‘We decided to lower the interest rate on the main refinancing operations of the Eurosystem by 25 basis points to 0.50% and the rate on the marginal lending facility by 50 basis points to 1.00%’.
‘Weak economic sentiment has extended into spring of this year. The cut in interest rates should contribute to support prospects for a recovery later in the year’, said ECB’s chief Mario Draghi.
Meanwhile, new €5 notes entered circulation across the Euro area on Thursday. The new bills are the first banknotes to get a revamp in the Europa series and more durable and harder to forge.