The European Union (EU) is set to experience stagnating growth this year, and the euro area will undergo a mild recession, according to the interim forecast published by the European Commission (EC). As expected, growth estimates for 2012 were cut largely across the board today.

The EC comments in its press release that the ‘unexpected stalling of the recovery in late 2011 is set to extend into the first two quarters of 2012′, with the EU registering zero growth this year and the Eurozone registering a 0.3% contraction.

The EC notes that ‘uncertainty remains high and developments across countries are uneven’. However, EU Commissioner for Economic and Monetary Affairs Olli Rehn, does note that there are signs of a recovery and modest growth is predicted to return in the second half of this year.

‘Although growth has stalled, we are seeing signs of stabilisation in the European economy. Economic sentiment is still at low levels, but stress in financial markets is easing.

‘Many of the steps that were essential to deliver financial stability and to establish the conditions for more sustainable growth and job creation have now been taken. With decisive action, we can turn the corner and move from stabilisation to boosting growth and jobs,’ he said.

JM