EU slashes eurozone economic forecasts

The European Commission cut its economic outlook for the eurozone on Tuesday, predicting it would grow only 1.1 per cent in 2015, down from a forecast of 1.7 per cent just six months ago.

The gross domestic product forecast for Germany, the common currency’s economic engine, was cut from 2 per cent in May to 1.1 per cent; France went from 1.5 per cent to 0.7 per cent.

The struggles the eurozone faces to return to a sustainable growth path lie in stark contrast to the US, which for the second and third quarter was the fastest six months of growth in a decade, and the UK, which is one of the fastest-growing economies in the Group of Seven. The commission raised its forecast for the UK saying it expected the economy to expand 2.7 per cent next year, compared with the 2.5 per cent May forecast.

Although none of the 18 members of the currency union were projected to see their economies contract, the severe downgrade raised anew the prospect that the bloc could be tipping into a triple-dip recession and may fuel fears the EU is headed for a dangerous deflationary spiral.

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