By JUERGEN BAETZ, Associated Press
BRUSSELS (AP) — 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 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," said the EU's Commissioner for Economic and Monetary Affairs, Olli Rehn.
Growth, however, is likely to remain too weak to generate many new jobs.
The European Union'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 in 2014, according to the Commission's fall forecast. Its last predictions, issued in May, had expected a drop of 0.1 percent in 2013.
The 17-country eurozone is forecast to continue its recovery from recession, from which it emerged in the second quarter. However, over 2013 as a whole, the eurozone is still expected to record a decline of 0.4 percent. 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." But 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 don't use the euro currency, unemployment is expected to dip from 11.1 percent in 2013 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 hadn't yet started, the report said.
"It is ridiculous to celebrate GDP growth — or non-growth — of 0.0 percent as a clear sign of recovery," said Hannes Swoboda, the center-left minority leader in the European Parliament.
He scolded the Commission for favoring "obsessive deficit reduction" that suffocates growth. Instead, he advocated a more balanced approach that would not reduce deficits as quickly, allowing for greater investment and job creation.
Rehn acknowledged "it is too early to declare victory; unemployment remains at unacceptably high levels."
The Commission expects Spain and Greece to return to tepid growth next year after seeing a contraction this year. But 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.
French Finance Minister Pierre Moscovici noted that the Commission's projections, as is usual, are based on the assumption that the government will implement no new reforms.
"But we have made concrete promises to continue to reduce the structural deficit in 2015 with more spending cuts, so I repeat that to go below that, 3 percent, is a credible promise," he told reporters.
Spain, which also secured a deadline extension this year, still seems far off with a projected budget deficit of 6.6 percent in 2015.
Using new powers given to the European Commission to avoid a repeat of the debt crisis, Brussels is currently assessing the eurozone nations' draft 2014 budgets. It will present its findings next week and can ask member states to amend their budgets to meet agreed targets.
Associated Press writer Sarah DiLorenzo contributed from Paris.
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