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Europe will remain mired in recession for the rest of this year, according to the latest EU forecasts.
The European Commission says the eurozone will shrink by 0.4 percent by the end of 2013., yet the EU executive’s economic chief remains upbeat.
“We will return to recovery in the second half of this year and on the condition that decisive policy action is taken in the member states and the european level it should have a more solid and sustainable recovery starting fro next year,” said Olli Rehn.
Austerity policies have been under fire from a number of EU leaders, as well as Nobel prize-winning economist Paul Krugman.
Now Brussels is softening its stance. It has given France and Spain an extra years to cut its deficit below the agreed three percent of GDP level
It is argued that slowing down the speed of spending cuts will bring back growth next year.
Those cuts have dampened consumer spending, leading to a knock-on effect in unemployment.
Forecasts suggest it will be as high 12.2 percent in the eurozone this year.
The Commission insists a structural overhaul of the European labour market is the best way to bring these numbers down, which should in turn get the economy going again.