Recession in eurozone on horizon in 2012

Reuters/Yves Herman

Europe could enter a new recession in 2012 as economic output across the eurozone collapses to just 0.5 per cent, European Union economy chief Olli Rehn said on Thursday. A vast annual survey of expectations across the region claims growth will drop sharply from its previous forecast of 1.8 per cent. 


The Italian economy will grind to a halt with growth of just 0.1 per cent although the public deficit is expected to come in under the three per cent threshold enshrined in EU law.

A previous figure of 1.1 per cent growth in Greece has changed drastically to a 2.8 per cent contraction.

Outside the eurozone, Britain’s economy is expected to expand at a sharply lower pace of just 0.6 per cent next year, a far remove from the 2.1 per cent put forward in an equivalent interim forecast six months ago.

Dossier: Eurozone in crisis

Meanwhile, European stock markets mostly plunged on deepening fears that debt-plagued Italy could fall victim to the eurozone debt crisis and threaten the entire euro project.

London's FTSE 100 index sank 1.27 per cent, Frankfurt's, 1.47 per cent and the Paris CAC 40 shed 0.98 percent.

MPs in Germany are also said to be discussing a move to allow countries to leave the eurozone without leaving the EU.

The motion will be tabled at the Christian Democrat party congress next week, according to the Berman business daily, Handelsblatt.

It states that if any eurozone country member continually fails to keep to the rules of the single currency it can voluntarily leave the eurozone while staying in the EU.


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