EC projects improved outlook for eurozone economy

The Eurozone's GDP would grow 1.2 per cent in 2014 but would fall behind the rates of its main western competitors or China, the European Commission (EC) said yesterday.

The US economy has been projected to 2.9 per cent and China 7.9 per cent, the EC said.

High debt and unemployment would continue to hold back recovery across the 18-member Eurozone following the sovereign debt crisis that hit in 2008, forcing five countries into bailout programmes followed by heavy austerity measures, according to the forecast.

Official unemployment levels are set to fall 12 per cent in the coming year, while sovereign debt would inch up to 95.9 per cent of GDP.

Eurozone in total holds $11 trillion in debt, with Europe's economic ''south'' – Greece, Cyprus, Spain, Portugal and Italy, holding most of it. Greece, the most indebted country has a debt of 176 per cent of its gross domestic product.

After it predicted a 1.1-per cent GDP growth for 2014, in November, the EC has revised its Eurozone growth forecast upward for the region.

Olli Rehn, EU Commissioner for Economic and Financial Affairs, said in Strasbourg, France, that the worst of the crisis might now be behind the EU, according to rt.com

The forecasts would however hardly be welcomed in Rome by Matteo Renzi, Italy's new prime minister, with the country's growth downgraded to just 0.6 per cent this year and debt levels still predicted to reach a euro-era high of 133.7 per cent of economic output.

''Italy emerged from recession in the fourth quarter, though very timidly,'' the report stated.

Italy's inability to quickly cut its sovereign debt which is next only to that of Greece in the eurozone, had fallen foul of Brussels budget rules which would hurt Renzi's flexibility for his tax and spending plans.

Rehn said he expected Rome to step up economic reform efforts that had stalled during the political infighting that characterised the tenure of Renzi's predecessor, Enrico Letta, Financial Times reported.

He added for Italy to begin to lower its very high public debt, the ED needed to see a somewhat higher structural adjustment, FT said.

In response to a question as to whether he whether he would grant Italy flexibility, Rehn noted that Renzi's finance minister, Pier Carlo Padoan, wrote reports while chief economist at the OECD advocating strong economic medicine.

He said he trusted he would apply this work in Italy.