The European Commission on Thursday said the bloc's economic outlook has "deteriorated" since the eurozone debt crisis, but foresaw no economic recession for this year.
The EU's executive projected growth in the 17 euro countries would reach 1.6 percent for 2011, mainly due to stronger growth in the first half of the year. Growth in the third quarter is expected to be only 0.2 percent, then shrinking to 0.1 percent for the fourth quarter.
EU Economic Affairs Commissioner Olli Rehn said the economy is "expected to come to a virtual standstill" by the end of the year, but that "we do not forecast a recession."
"Recoveries from financial crises are often slow and bumpy," he told reporters in Brussels. "Moreover, the EU economy is affected by a more difficult external environment, while domestic demand remains subdued. The sovereign debt crisis has worsened, and the financial market turmoil is set to dampen the real economy."
Budgetary discipline needed
Rehn said in order to get the eurozone's economic recovery back on track, countries have to get their budgets back on a sustainable path and safeguard their financial stability.
"This requires steadfast continuation of the strategy of differentiated, growth-friendly fiscal consolidation and the implementation of the decisions to support financial stability," he said.
The Commission also released growth projections for the EU's seven biggest economies. Germany's forecast was the only one to improve, up to 2.9 percent from a 2.6 percent forecast in May.
Poland's economy is expected to grow the fastest, at 4 percent. France's forecast was 1.6 percent, Italy's 0.7 percent and Spain's 0.8 percent.
Author: Andrew Bowen (AFP, Reuters)
Editor: Martin Kuebler