Economic forecast for Europe falls

BRUSSELS, May 4 (UPI) -- European Commission analysts said the economy in the 16-member eurozone would contract by 4 percent in 2009, twice as fast as previously thought.

Joaquin Almunia, commissioner for economic and monetary affairs, said the European economy was "in the midst of its deepest and most widespread recession in the post-war era," the Telegraph reported Monday.

The EC analysts previously said the economy would shrink 1.9 percent this year.

The current prediction includes unemployment reaching 11.5 percent by the end of 2010. An additional 8.5 million are expected to lose their jobs.

The commission also said the eurozone economy would decline slightly in 2010. It had previously predicted growth of 0.4 percent for next year.

While the economic picture is expected to deteriorate, "the ambitious measures taken by the government 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," Almunia said.

On the inflation front, the EC said inflation would drop to 0.4 percent in 2009 and climb to 1.2 percent in 2010, sidestepping an economy-stalling dynamic known as deflation, where price declines cause consumers to hesitate on making purchases.