EDHS Contemporary World Affairs

EU economies will contract by 4% in 2009, the European Commission has forecast - more than twice what as it had predicted at the start of the year.

The worsening of the global financial crisis, dropping levels of world trade and continuing house value falls had prompted the huge downgrade, it said.

Europe's economy would not start recovering until the second half of next year, the commission added.

It also predicted unemployment in the 27-nation EU would reach 10.9% in 2010.

The jobless figure would be 11.5% across the 16 countries using the euro, known as the eurozone, it added.

'Exceptional circumstances'

"The European economy is in the midst of its deepest and most widespread recession in the post-war era," said EU Economic and Monetary Affairs Commissioner, Joaquin Almunia.

"But the ambitious measures taken by governments and central banks in these exceptional circumstances are expected to put a floor under the fall in economic activity this year and enable a recovery next year."

Countries needed to focus on cleaning up banks' toxic assets, he added.

The commission's forecast is not as bleak as the outlook from the International Monetary Fund (IMF) - which says eurozone GDP will fall by 4.2% this year.

However it is less optimistic than the European Central Bank which forecast a 3.8% contraction in its latest estimate.

In January, the commission had predicted the eurozone would shrink by 1.9% in 2009 and grow by 0.4% in 2010.

As well as the downward revision for this year, it now expects the eurozone economy to shrink by 0.1% next year.

Irish woes

The commission expects inflation to fall well below the European Central Bank's target of 2%.

It projects inflation to slow to 0.4% this year from 3.3% in 2008, and to rise to only 1.2% in 2010.

While the downturn was widespread, the extent of economic contraction varied between nations.

do u think other countrie's economy will shrink by more than 4%?