This commission's predictions for this year reflect that grim reality. It expects the EU's economy to contract by 0.3 percent, rather than remaining flat as it forecast in the spring. It also predicts that the eurozone GDP will fall 0.4 percent, against a previous expectation of a 0.3 percent drop.
Official third-quarter GDP figures â¿¿ which will show whether the eurozone has entered recession as economists suspect it has â¿¿ are due to be released on Nov. 15. A recession is defined as two quarters in a row with negative growth.
Many economists have argued that, in solving one crisis by cutting government spending and raising taxes, politicians have exacerbated another â¿¿ slow or negative growth. Meanwhile, tighter banking rules have hurt lending, the fuel economies need to grow.
The commission's report also confirms that the crisis is not sparing even Germany, Europe's largest economy and the traditional motor for growth.It predicted that Germany would eke out just 0.8 percent growth in 2012, compared with its earlier forecast of 1.7 percent. ECB President Mario Draghi warned Wednesday that "the latest data suggest that these developments are now starting to affect" the German economy. In a speech given in Frankfurt, Draghi called on governments to back up the ECB's plans to help countries with their borrowing costs by cutting debt and improving growth through cutting excessive red tape. "Across the whole euro area, governments are making determined efforts to reverse economic imbalances," he said. "They are implementing reforms to redress the misguided policies of the past and to create sustainable long-term growth. It is a difficult road and there is still a long way to go. But the early signs are encouraging." "Financial developments in Germany are the mirror-image of financial developments in the rest of the euro area," Draghi added. "And this means that measures to ensure the stability of the euro area as a whole will also be to the benefit of Germany."