Eurozone to contract by 0.3 per cent

The economy of the eurozone will contract in 2012, according to the latest forecast from the European Commission.

The executive body of the European Union says that the 17 members of the currency bloc will shrink by 0.3 per cent in 2012, having forecast an expansion of 0.5 per cent in November.

The Commission expects the eurozone's most troubled economies to be hit the hardest by the recession. Greece is now pencilled in for a 4.4 per cent contraction over the year, worse than the 2.8 per cent shrinkage foreseen in November. Portugal is expected to slump by 3.3 per cent, more than the 3 per cent contraction expected five months ago. Spain is now expected to shrink by 1 per cent, rather than 0.7 per cent. The Italian economy is expected to fall by 1.3 per cent, dramatically more than previous 0.1 per cent.

The forecast for the stronger states of the eurozone has also been downgraded, although considerably less. The French economy is expected to post growth of 0.4 per cent over the year, less than the 0.6 per cent seen in November. Growth of 0.6 per cent is forecast for Germany, down from 0.8 per cent. The Dutch economy is, however, expected to be hit especially hard by the slowdown, with a contraction of 0.9 per cent forecast, down from an earlier prediction of 0.5 per cent growth.

Outside the eurozone, Britain's economic forecast is unchanged at 0.6 per cent growth.