Hopes of eurozone recovery momentum were dashed Tuesday, with new EU forecasts seeing more agony for millions on the dole as Brussels stepped up pressure on Germany and France to re-shape their economies.
File picture shows people waiting in line at a government employment office in the centre of Madrid on September 4, 2012
The European Commission said growth across the 17-member single currency area would amount to 1.1 percent next year, down from the 1.2 percent it forecast in May.
But it should then rise to 1.7 percent in 2015.
The eurozone economy will shrink by 0.4 percent this year, the commission said, unchanged from the previous estimate.
The Commission signalled that France and Spain are set to overshoot their deficit reduction targets, and conceded that a "discussion" is imminent on Germany's longstanding trade surplus -- most recently criticised by the US Treasury as a drag on EU-wide output.
The growth figures compare poorly with sterling neighbour Britain, tipped to grow 1.3 percent this year followed by 2.2 percent in 2014 and 2.4 percent in 2015.
The US economy meanwhile will expand 1.6 percent in 2013, rising to 2.6 percent and 3.1 percent in the next two years.
Brussels warned that eurozone unemployment would be stubbornly higher than first thought next year -- at 12.2 percent rather than 12.1 percent -- so potentially going through the 20-million mark.
"The fiscal consolidation and structural reforms undertaken in Europe have created the basis for recovery," EU Economic Affairs Commissioner Olli Rehn said, speaking of a "turning-point" for the global economy.
At the same time, it is "too early to declare victory," he said, adding that "unemployment remains at unacceptably high levels."
With eurozone inflation tipped as stable at around the 1.5-percent mark for the period covered by the forecasts, the Commission is worried about fiscal "uncertainty" in the United States as debt mounts, coupled with mounting "vulnerabilities" in emerging markets.
Brussels said that years of commodities and investment-driven growth in the Russian and Chinese economies, for instance, may now be out-of-date and the emphasis should be put on domestic rather than export demand.
Trade imbalances within the eurozone are already causing concern, the Commission pegging Germany's current account surplus -- the broadest measure of trade and fund flows -- at 7.0 percent of gross domestic product (GDP) this year, easing only slightly to 6.6 percent next year and 6.4 percent in 2015.
The reading has been above the EU's recommended ceiling of 6.0 percent since 2007.
Rehn noted that a July EU leaders summit had called on Berlin "to create sustained conditions for wage growth" and to boost infrastructure investment so as "to help domestic demand."
"There could be a notification," Rehn said of what he said was a political issue to be discussed by EU finance ministers next week.
Germany's export-led growth, which has less of a trickle-down effect than demand-led growth would, has been a sore point for some time.
Berlin late last month rejected the US criticism as "incomprehensible," saying there were no such imbalances in the EU economy.
France, Spain could miss targets
As well as unemployment, the modest recovery poses other problems, especially for member state public finances as tax revenues remain under pressure.
France and Spain especially could again miss agreed EU public deficit targets out to 2016, the Commission said.
In both cases, marking out further political battles ahead, Rehn said that the need for economic reform is "of particular urgency."
The Commission's forecasts put the French public deficit -- the shortfall between spending and revenue -- at 4.1 percent this year, 3.8 percent next and still 3.7 percent for 2015.
With the French economy struggling, President Francois Hollande faces growing pressure from Brussels to meet the EU's 3.0-percent-of-GDP ceiling as agreed by 2015.
French Finance Minister Pierre Moscovici said the government was committed to cost-cutting and insisted that the public deficit would shrink to the mark on schedule, despite doubts in Brussels.
If it misses its targets, Paris could face fines or intervention by Brussels under new rules on economic policy coordination.
Spanish public finances are even more perilously wide of the mark.
As Madrid strives to emerge from a burst property-and-banking bubble, nine quarters in a row of recession and soaring joblessness, Spain was given until 2016 to comply after a bailout for its banks.
However, despite waves of austerity already, Spain's public deficit will hit 5.9 percent next year and worse still, rise again to 6.6 percent in 2015.
Twice-bailed out Greece is finally set to emerge from six years of recession next year.
The downturn, though, would continue throughout 2014 in Slovenia and Cyprus.
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