Eurozone faces recession in 2013

CNC report from Brussels
Added On February 23, 2013

The eurozone faces another full year of recession with shrunk economic output and increased unemployment rate in 2013.

That's the latest warning by the European Commission, the EU's executive arm.

Only three months ago, the commission had still been positive about the outlook, predicting that the eurozone GDP would grow.

The European Commission said on Friday that the crisis-battered eurozone's economic output is expected to contract by 0.3 percent this year.

That means millions more people are likely to lose their jobs and the already record unemployment will continue to climb right into 2014.

As for the 27-nation EU, the report projects a 0.1-percent growth in 2013, down from an earlier forecast of 0.4 percent.

The commission does say leading indicators suggest that the GDP in the EU is bottoming out and economic activity is expected to gradually accelerate.

SOUNDBITE (English) OLLI REHN, European Economic Affairs Commissioner:
"The ongoing rebalancing of the European economy is continuing to weigh on growth in the short term. The current situation can be summarised like this: we have disappointing hard data from the end of last year, some more encouraging soft data in the recent past, and growing investor confidence in the future. The decisive policy action undertaken recently is paving the way for a return to recovery. We must stay the course of reform and avoid any loss of momentum, which could undermine the turnaround in confidence that is underway, delaying the needed upswing in growth and job creation."

The commission says there would not be a return to growth for the eurozone until 2014.

Even then, the pace of expansion will be slow, at a rate of 1.4 percent.

The prognosis for the overall deficit in the eurozone slightly worsens, too.

Now the commission expects it to be 2.8 percent this year and 2.7 percent in 2014.

Much of the attention is on France, where the public deficit is set to be worse than expected in 2013 and 2014.

EU member states are all mandated to eventually bring their deficits below 3 percent of GDP. If they do not comply, there might come sanctions.