BRUSSELS, Feb. 24 (UPI) -- Much of Europe will fall into a mild recession this year but it will be worse in some countries and the continent risks a deep slump, the European Union said.
The overall eurozone economy will probably shrink 0.3 percent in 2012, down from a 0.5 percent growth forecast in November 2011, the EU's executive branch, the European Commission, said in an interim forecast.
But "the balance of risks to [economic] growth remains tilted to the downside amid still-high uncertainty," the commission said.
It said its forecasts assumed "adequate policy measures are decided and implemented" to tackle Europe's crippling sovereign-debt crisis.
If the crisis gets "massively" worse, the "outcome would most likely trigger a deep and prolonged recession, not sparing even those countries which have shown more resilience so far," it said.
The economies forecast to experience the sharpest falls this year are those that received bailouts or whose sovereign debt has risen to levels markets consider unsound.
Greece's economy was forecast to contract 4.4 percent, Portugal's 3.3 percent, Italy's 1.3 percent and Spain's 1 percent, the commission report said.
Europe's largest economies, the core eurozone nations of Germany and France, were forecast to grow only 0.6 percent and 0.4 percent respectively, down 0.2 percentage points from November's forecast, the report said.
The only countries projected to grow more than 2 percent -- Latvia, Lithuania and Poland -- are East European and outside the 17-country euro currency bloc.
Despite the serious downside risks, a recovery is "still forecast for the second half of the year but is expected to be more modest and to occur later than forecast in the autumn," the report said.
During a recession, employment, investment spending, household incomes, business profits and inflation typically fall, while bankruptcies and unemployment rise.
"Greece, Portugal and Spain account for 95 percent of the rise in unemployment in the EU since late 2010," the report said. "Additionally, Spain and Greece have seen their youth unemployment rates surge (from already high pre-crisis levels) to close to 50 percent."
