European Union Says Growth Will Remain Miserable And Unemployment Will stay Sky High

BRUSSELS (AP) - Europe's economic recovery will continue into the second half of the year, though at a subdued pace, while unemployment will remain high through next year, the European Commission said Tuesday.

The European Union's economy is expected to grow by 0.5 percent over the second half of the year and be flat for the whole year, returning to growth of 1.4 percent in 2014, according to the Commission's fall forecast. Its last forecast in May still expected an economic decline of 0.1 percent in 2013.

The Commission, the EU's executive arm, also expects the 17-country eurozone to continue its recovery from a protracted recession, from which it emerged in the second quarter. However, over 2013 as a whole, the eurozone is still expected to record a decline of 0.4 percent. In 2014, though, the Commission is penciling in 1.1 percent growth, revised downward from a 1.2 percent in its last forecast.

"There are increasing signs that the European economy has reached a turning point," said the EU's Commissioner for Economic and Monetary Affairs, Olli Rehn.

Strengthening domestic demand is expected to underpin the recovery as governments also slow the pace of austerity measures such as spending cuts and tax increases, according to the forecast.

"The fiscal consolidation and structural reforms undertaken in Europe have created the basis for recovery," Rehn added.

The eurozone's output, however, currently remains about 3 percent below the level recorded in 2008, when the global financial crisis was just entering its most acute phase and Europe's government debt crisis had not yet started, the report said.

The eurozone's projected tepid growth will fail to create many new jobs, leaving the unemployment rate unchanged at its current record high of 12.2 percent for this and next year, dropping to 11.8 percent only in 2015, according to the forecast.

Rehn acknowledged "it is too early to declare victory; unemployment remains at unacceptably high levels."

The unemployment rate for the wider EU-28, which includes members like Britain and Poland who don't use the euro currency, is expected to dip from 11.1 percent in 2013 to 11 percent next year.

The Commission expects crisis-hit Spain to return to growth of 0.5 percent next year, after seeing its economy shrink by another 1.3 percent this year. For Greece, the EU sticks to its forecast that the country will manage to eek out tepid growth of 0.6 percent next year after a further projected decline of 4 percent this year.

Unemployment is forecast to stay above 26 percent in Spain through the end of next year, and it's expected to drop only slightly in Greece, from around 27 percent now to 26 percent in 2014.

___

Follow Juergen Baetz on Twitter at http://www.twitter.com/jbaetz