Europe's economy will shrink in 2012, with Italy and Spain facing sudden crunches as they battle to escape the debt crisis, the European Commission said.
The 17-nation euro economy will contract 0.3 percent, the commission said, abandoning a November forecast of 0.5 percent growth. The downgrade was mainly due to projected contractions of 1.3 percent in Italy and 1 percent in Spain.
“The euro area has entered into a mild recession,” European Union Economic and Monetary Commissioner Olli Rehn told reporters in Brussels today after releasing the forecasts. “Prospects have worsened and risks to the growth outlook do remain, but there are signs of stabilization.”
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