BRUSSELS, Nov. 7 (UPI) -- The European Commission said Wednesday economic growth in Europe would be even slower than previously expected.
In a release of new economic predictions, the European Union's governing body said the gross domestic product would decline 0.3 percent in the 27-member European Union in 2012 and grow by 1 percent in 2013. In its previous prediction, the commission said EU growth would be flat in 2012 and would rise by 1.3 percent in 2013.
The New York Times reported Wednesday a similar downgrade of expectations was posted for the 17-member eurozone, the region that shares the euro as a common currency.
The commission's prior forecast of growth in the eurozone in the spring was set at a 0.3 percent contraction in 2012 and a 1 percent expansion in 2013. Wednesday's release calls for 0.4 percent contraction this year and 0.1 percent growth for 2013.
On the positive side, market stress "has been reduced," said Olli Rehn, commissioner for the eurozone, referring to the European Central Bank's decision to buy short-term government bonds from countries struggling to dig themselves out of debt as long as they first complied with terms set out in the European Stability Mechanism, the eurozone's bailout fund.
He also said the EU was experiencing a "difficult process of macroeconomic re-balancing, which will still last for some time."
"It's going to be a touch couple of years," echoed Societe Generale economist James Nixon in London, who predicted Spain in particular would fall short of its fiscal goals, further undermining confidence in the euro.
"It is quite a pessimistic conclusion on Spain," he said.
"I think the implication of that is that we are likely to see more austerity next year and that means that the growth outlook will be worse than predicted," he added.