EUROPEAN RECOVERY MAINTAINS MOMENTUM AMID NEW RISKS - EC SPRING FORECAST

The EU economy is set to further consolidate its gradual recovery, with prospects for 2011 looking slightly better than projected in the autumn, according to the European Commission's (EC) spring forecast.

GDP is projected to grow by about 1.75 per cent this year and by close to two per cent in 2012.

This outlook is supported by better prospects for the global economy and overall upbeat EU business sentiment, the EC said on May 13 2011.

Inflation, however, is rising faster, reflecting the increase in commodity prices.

Headline inflation is projected to average almost three per cent in the EU and 2.5 per cent in the euro area this year, before easing to about two per cent and 1.75 per cent, respectively, in 2012.

Meanwhile, labour-market conditions are expected to slowly improve over the forecast horizon.

Unemployment is projected to fall by half a percentage point to a little more than nine per cent and to 9.75 per cent in the EU and the euro area by 2012.

Fiscal consolidation is progressing, with the public deficit set to decline to about 3¾% of GDP by 2012. The prospects continue to vary considerably for individual member states, however, the EC said.

European Commissioner for Economic and Monetary Affairs Olli Rehn said: "The main message in our forecast is that the economic recovery in Europe is solid and continues, despite recent external turbulence and tensions in the sovereign debt market.

"Public deficits are clearly declining. It is now essential to strengthen these trends of growth and consolidation and also ensure that they translate into more and better jobs. This calls for continued fiscal consolidation and determined implementation of structural reforms that help job creation and improve the competitiveness of our economies," Rehn said.