2010 eurozone growth to lag well behind Asian rivals

(BRUSSELS) - Economic growth across Europe will be uncertain, fragile and dwarfed by emerging Asian rivals throughout 2010, according to new Brussels forecasts released on Thursday.

As nervous euro countries anxiously study developments in debt-saddled Greece, the European Commission acknowledged that "uncertainty" surrounding even these projections "remains rife, as recent developments in financial markets illustrate well."

Brussels predicts just 0.7 percent expansion for both the eurozone and the full 27-nation European Union, the world's biggest open trading bloc, in disappointing forecasts unchanged from November.

After contractions of 4.0 percent for the 16 countries that share the euro currency and 4.1 percent across the EU in 2009, recovery is "materialising" but "still fragile," said the bloc's economic and monetary affairs overlord Olli Rehn.

Static inflation projections tip 1.1 percent for the eurozone and 1.4 percent across the EU, the commission also said.

Rehn told a press conference that the absence of any improvement in the overall European economic picture was causing fresh concern given "markedly more robust recovery in the emerging economies, especially in Asia."

He said world trade is expected to grow by a stronger-than-expected seven percent in 2010 (after a post-war record slump of 12 percent last year), indicating rivals on the global economic stage powering ahead.

However, the main downside, Rehn said, remains alarming conditions on financial markets where the Greek debts and widened sovereign bond spreads are straining the eurozone's political ties as experts formulate plans in case its biggest players have to cough up bailout support.

Detailed projections from seven core economies that make up 80 percent of Europe's worth -- Britain, France, Germany, Italy, the Netherlands, Poland and Spain -- showed a downwards-revised projection for straggler Britain.

From 0.9 percent growth for the year as predicted in November, Brussels now sees just 0.6 percent expansion for Britain, which Rehn largely blamed on an end to lower value-added tax (VAT) rates.

Spain is forecast to remain in recession right through 2010, although the predicted 0.6 percent contraction shows improvement from projections before the turn of the year.

Eastern industrial powerhouse Poland, the bloc's top performer in 2009, is expected to streak even further ahead in 2010, with its growth forecast jumping from 1.8 percent to 2.6 percent.

Of the traditionally big eurozone economies, major exporter the Netherlands is now expected to show the sharpest progress, with projected figures for France and Germany both static.

EU interim forecast: Fragile recovery in progress - full document