The European Union’s economic recovery is expected to gather pace quicker than expected this year. However, much appears to depend on preventing the type of economic collapse seen in Greece from spreading.
Demand from emerging nations could aid the EU's recovery
Economic growth in the EU is set to pick up faster than previously expected according to the European Commission – provided that the type of economic collapse seen in Greece can be kept contained.
The commission on Wednesday raised growth predictions for the eurozone to 0.9 percent this year, compared to a 0.7 percent forecast made in February.
However, Brussels warned of the potential of a domino effect that could bring down other European economies with high burdens of debt.
The danger posed by wider financial meltdown was likened that of a forest fire by EU's economic and monetary affairs commissioner Olli Rehn.
"In order to safeguard the economic recovery, which is still rather modest and somewhat fragile, it's absolutely essential to contain the bushfire in Greece so that it will not become a forest fire," said Rehn.
Threat to stability
The fear of economic contagion constituted a real "threat to financial stability for the European Union and its economy as a whole," Rehn stressed.
Greece is close to the brink of debt default, requiring a bailout by other members of the European Union and the International Monetary Fund.
Greece, on the brink of default, has asked for help
The forecasts reveal weaknesses in states such as Spain, Portugal and Ireland, which have high debt along with low growth or recession.
Spain's deficit is tipped to hit almost 10 per cent of gross domestic product in 2010, with the economy shrinking by 0.4 percent.
Britain has the highest deficit of the EU countries considered at risk, set to hit 12 percent of GDP in 2010. However, the British economy is expected to grow by 1.2 percent during the same period.
According to the twice-yearly forecast, growth for the EU as a whole is set to reach 1 per cent this year and 1.7 per cent next year.
Growth is expected to be driven by demand from emerging economies such as China and Brazil, rather than demand within Europe.
Editor: Rob Turner