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TheStreet Open House

EU Hopeful Eurozone Will Start Growing In 2013

The wider economy of the 27-nation EU, which includes non-euro members such as Britain and Poland, is also bottoming out, according to the Commission. Here too, it lowered its 2013 growth forecast from 0.4 percent to 0.1 percent. And in 2014, it expects the world's largest economic bloc with 500 million people to grow 1.6 percent.

One of the key problems afflicting Europe is unemployment, and the Commission said an improvement was unlikely soon, with the jobless rate in the eurozone rate swelling to a record 12 percent.

While unemployment is high, the trend is not uniform: Germany has seen unemployment falling while Greece and Spain have seen their rates spike to around 26 percent. The Commission expects them to rise to around 27 percent.

The Commission forecast that Germany will grow 0.5 percent this year, but France, Europe's second-largest, will record only 0.1 percent growth. Italy and Spain are expected to decline 1 percent and 1.4 percent respectively.

Meager growth means some governments might have to tighten their belts further â¿¿ possibly in France, where the 2013 budget is predicated on a growth rate of 0.8 percent.

The Commission said France was likely to miss its target of getting its deficit below 3 percent of its annual gross domestic product. Instead, it predicted the deficit will rise from 3.7 percent this year to 3.9 percent next. And it forecast that France's debt burden will rise from 90 percent of GDP last year to 95 percent in 2014.

Rehn urged the French government to push ahead with measures to reduce its deficit and implement reforms to the labor market and to pensions. "France faces significant challenges," he said.

Tom Rogers, senior economic adviser at Ernst & Young, said he was encouraged with the message coming from the Commission.

"Reforms are already bearing fruit in a number of peripheral economies, and this should be an incentive for other governments to follow suit," said Rogers.

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