BRUSSELS (MNI) – GDP growth in Europe is expected to grind to a
halt by the end of the year as global demand weakens, business and
consumer confidence declines, and the sovereign debt crisis continues to
take its toll, the European Commission said Thursday, revising down its
previous quarterly forecasts.

The economies of the Eurozone are now expected to grow in the
aggregate by just 0.2% in the third quarter of this year and 0.1% in the
fourth, down from the Commission’s spring forecasts of +0.4% in each of
those quarters.

“Prospects are gloomier and the risks to the outlook are tilted to
the downside,” said EU Economic and Monetary Affairs Commissioner Olli
Rehn.

Despite the slowdown, Europe should escape a “double dip”
recession, the Commission said.

As a group, the 17 countries that use the euro are still expected
to grow 1.6 percent in 2011, thanks mainly to a strong German economy
earlier in the year.

Europe’s largest economy is expected to grow 2.9% in 2011, slightly
more than the 2.6% rate predicted by the Commission in May, but at a
declining pace. The German economy is expected to expand 0.4% in the
third quarter of this year and 0.2% in the fourth, compared to 1.3% in
the first quarter and 0.1% in the second.

Inflationary pressures in the euro area have also abated faster
than previously envisaged by the Commission as a result of weaker
commodity prices and slower growth, the Commission said. The Harmonised
Index of Consumer Prices, a measure used to compare inflation across the
EU, is now expected to show prices rising 2.5% in 2011 compared to 2.6%
as predicted in the Commission’s Spring forecast.

Inflation numbers were cut in five of the EU’s seven largest
economies. Only in the Netherlands was the inflation figure revised
upwards from 2.2% to 2.5%. The Commission’s projections for inflation in
Italy were unrevised at 2.6%.

The revisions to the Commission’s forecasts were based on updated
figures for the EU’s seven largest economies: Germany, France, the
United Kingdom, Italy, the Netherlands, Spain and Poland.

–Brussels bureau, +324-952-28374; pkoh@marketnews.com

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