The eurozone will not return to growth until 2014, the European commission said on Friday, reversing its prediction for an end to recession this year and blaming a lack of bank lending and record joblessness for delaying the recovery.
The 17-nation bloc’s economy, which generates nearly a fifth of global output, will shrink 0.3% in 2013, the commission said, meaning the eurozone will remain in its second recession since 2009 for a year longer than originally foreseen.
The commission, the EU executive, made a forecast late last year for 0.1% growth in the eurozone’s economy for 2012, but now says tight lending conditions for companies and households, job cuts and frozen investment have delayed an expected recovery. It sees the eurozone economy growing 1.4% in 2014, with a figure of -0.6% for 2012.
“The improved financial market situation contrasts with the absence of credit growth and the weakness of the near-term outlook for economic activity,” said Marco Buti, the commission’s director-general for economic and monetary affairs. “The labour market … is a serious concern,” he said, in a preamble to the commission’s latest forecasts.
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