The European Commission today downgraded its outlook for growth in Europe in the Spring Interim Forecasts and expects a contraction of 0.3% for the euro area down from the previously projected expansion of 0.5% in November.
Speaking to reports in Brussels after the report European Union Economic and Monetary Commissioner Olli Rehn said that the euro area has entered into a mild recession with the downside revision to growth Rehn exppained that prospects have worsened and risks to the growth outlook do remain, but there are signs of stabilization.
The EC also revised higher their inflation expectations to 2.1% from 1.7% which somewhat ease the dovish calls from the ECB that still see the risk for inflation to undershoot the 2.0% target.
As for nations that are the center of the debt crisis and resulted to assistance from the EU and IMF, Greece is expected to end the year with a steep 4.4% contraction revised also deeper from 2.8% contraction expected. Portugal is expected to contract 3.3% from 3.0% while Ireland is expected to expand by 0.5%.
Rehn praised the progress in Portugal and Ireland despite the weak picture printed saying that the programs in both nations are on track. As for Spain and Italy that are also the center of attention with the heavy debt load and deep austerity Rehn said that they are implementing very important structural reforms in order to boost their growth potential.
Still the EC forecasts a deep 1.0% contraction for Spain in 2012 and for Italy even a deeper 1.3% contraction.
European Commission Interest forecast for GDP: