Europe’s economy will continue to recover through next year, but at a subdued pace that will leave unemployment near record highs, the European Commission said on Tuesday.
The commission, the EU’s executive arm, said rising business confidence and strengthening domestic demand are expected to underpin the recovery as governments also slow the pace of austerity measures, such as spending cuts and tax increases.
“There are increasing signs that the European economy has reached a turning point,” EU Commissioner for Economic and Monetary Affairs Olli Rehn said.
Growth, however, is likely to remain too weak to generate many new jobs.
The EU’s economy is expected to grow 0.5 percent over the second half of the year, leaving it flat for the whole year, and expand 1.4 percent next year, according to the commission’s fall forecast. Its last predictions, issued in May, had expected a drop of 0.1 percent this year.
The 17 country eurozone is forecast to continue its recovery from recession, from which it emerged in the second quarter. However, the eurozone is still expected to record a decline of 0.4 percent this year. For next year, the commission is penciling in 1.1 percent growth, downward marginally from its previous forecast of 1.2 percent.
Rehn said governments’ deficit reductions and reforms “have created the basis for recovery.” Yet the forecasts show that will do little to alleviate the plight of the jobless.
Unemployment in the eurozone is expected to remain at its record high of 12.2 percent this and next year, dropping only modestly to 11.8 percent in 2015.
In the wider, 28 country EU, which includes members like Britain and Poland who do not use the euro, unemployment is expected to dip from 11.1 percent this year to 11 percent next year.
Furthermore, despite the recovery, the eurozone’s economic output remains about 3 percent below the level recorded in 2008, when the global financial crisis was entering its most acute phase and Europe’s debt crisis had not yet started, the report said.
The commission expects Spain and Greece to return to tepid growth next year after seeing a contraction this year. However, unemployment is forecast to stay above 26 percent in Spain through the end of next year, and to drop only slightly in Greece, from around 27 percent now to 26 percent.
The forecast for France, the bloc’s second-largest economy, suggested President Francois Hollande’s government might have to pass more austerity measures to meet the EU budget deficit target.
The EU has given France two more years to bring its budget deficit below 3 percent of GDP, but the new forecast puts it as 3.7 percent in 2015.