Weak recovery in the Eurozone

Growth in the Eurozone will be sluggish in 2012, while the single currency area faces strong downside risks, Ernst and Young’s spring economic forecast will state today. The euro area economy is recovering “at a much slower pace than expected,” with forecast GDP growth of just 1.5 per cent this year and 1.7 per cent in 2012, Ernst and Young will announce. “And although we still expect a muted recovery for the Eurozone over the next 12 months that could easily be blown off course by global economic events or an escalation of the Eurozone debt crisis,” said Ernst and Young economist Marie Diron. Unemployment across the Eurozone could still be around 14m in 2015, according to the forecast – considerably above 2007 levels. Given the frailty of the economy, the European Central Bank could be making a mistake by raising interest rates, Diron feels. The ECB is widely expected to hike interest rates when it meets on Thursday of this week.