EU forecasts better than expected recovery

Policymakers planning austerity measures across Europe will point to yesterday's European Commission growth forecasts upgrades as evidence that spending cuts are not hampering the Continent's economic recovery.

As part of its twice-yearly forecast updates, the commission said that growth in the European Union would reach 1.8 per cent in 2010, up from earlier estimates of 1 per cent. The upgrade comes after "particularly strong" growth in the second quarter.

Predictions in the 16-country eurozone were also upgraded. The commission's economists now expected the eurozone to grow at 1.7 per cent this year, after earlier estimating just 0.9 per cent.

"While activity is still expected to moderate in the second half of the year, the outlook is for a slightly improved quarterly profile compared to the spring forecast, due to the spill-over of some momentum from the second quarter," the commission said in its report.

Unions from across Europe have attacked planned cuts, arguing that the measures could harm the Continent's fragile economic recovery and raise the spectre of a so-called "double-dip" recession.

Yesterday's forecasts will dampen the row, with policymakers now able to point to the upgrades as evidence that a renewed recession looks increasingly unlikely.