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Business

EU slashes growth outlook for Greece

Greece's economy will expand much less than expected, according to the EU's latest projections. The rest of the eurozone is set to benefit from cheap oil and a weak euro, the bloc's spring outlook suggests.

In its spring forecast, released on Tuesday, the European Commission predicted Greece would add just 0.5 percent to its yearly economic output in 2015, significantly less than the 2.5 percent the bloc's executive estimated three months ago.

"In light of the persistent uncertainty, a downward revision has been unavoidable," Pierre Moscovici, the European Union's Economic Affairs Commissioner, told a news conference, hinting at Greece's ongoing struggle with its creditors in the EU as well as the International Monetary Fund (IMF).

EU officials have criticized the government of Prime Minister Alexis Tsipras for wiping out the economic headway that Greece had previously achieved. Tsipras' election claim that he would end austerity in Greece has triggered protracted negotiations with creditors.

In the coming days,

two payments from Athens to the IMF totaling almost 1 billion euros ($1.1 billion) are due

- one on Wednesday and one on May 12.

Eurozone looking perkier

For the rest of the eurozone, the Commission expects growth in 2015 to come in at 1.5 percent, up from the previous forecast of 1.3 percent and lifted by cheap oil and a weak euro.

German GDP is set to grow by 1.9 percent, up from an earlier projection of 1.5 percent. France and Spain are also set to expand by more than previously thought.

"The European economy is enjoying its brightest spring in several years ... but more needs to be done to ensure this recovery is more than a seasonal phenomenon," Moscovici said, stressing the need for investment, reforms and "responsible fiscal policies."

Four eurozone members still have deficits exceeding the agreed upon threshold of 3 percent of GDP, with France and Spain being the worst offenders. Almost three-quarters of these countries have a total debt level above the requisite 60 percent of GDP.

The Commission also said that while inflation had gone deep into negative territory in Greece, the

specter of deflation had receded in the rest of the eurozone

, with the EU now expecting a modest 0.1 percent rate of inflation, up from a previous estimate of -0.1 percent.

ng/cjc (Reuters, AFP, dpa)

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