EU Now Says Eurozone Will Contract in 2012

The EU has changed its forecast and s now saying that the European economy will shrink in 2012. Italy and Spain will have a really hard time with projected contractions of 1.3 percent in Italy and 1 percent in Spain.

The 17-nation euro economy will contract 0.3%, not grow 0.5% as they had originally said.

Bloomberg: “The euro area has entered into a mild recession,” European Union Economic and Monetary Commissioner Olli Rehn told reporters in Brussels today after releasing the forecasts. “Prospects have worsened and risks to the growth outlook do remain, but there are signs of stabilization.”

Two days after Greece clinched a second bailout, the forecasts showed an economy pockmarked by the two-year-old fiscal crisis and looked set to stiffen resistance in southern Europe to further doses of German-demanded austerity.

The full-year Europe-wide contraction would be the first since 2009, when a 4.3 percent drop in the wake of the U.S.-led banking crisis exposed the overborrowing and imbalances that plunged Europe into its sovereign debt troubles.

Mr   Rehn said that Financial markets “remain still rather fragile, but there arre also signs of stabilization,”