The economic downturn in Europe will be twice as deep as previously forecast with unemployment reaching over 11 per cent, according to figures from the European Commission.
The EC’s analysts warned that the 16 euro-zone economies will shrink 4 per cent this year, a contraction that is double the level it estimated only four months ago.
Unemployment is expected to soar to 11.5 per cent by the end of next year. The commission has forecast that 8.5 million jobs will be lost across the 16 euro-zone countries by the end of 2010 with Ireland and Spain expected to record the highest rates of unemployment. The spike in unemployment all but wipes out the gains made between 2006 and 2008 when 9.5 million jobs were created.
However, it has expressed confidence that the end of the worst recession since the Second World War is near.
Despite the grim forecasts for 2009, the Commission stressed that the European economy is set to stabilise in 2010 when the rate of contraction is expected to slow to 0.1 per cent.
Joaquin Almunia, Commissioner for Economic and Monetary Affairs, said: “The European economy is in the midst of its deepest and most widespread recession in the post-war era. But the ambitious measures taken by the government and central banks in these exceptional circumstances are expected to put a floor under the fall in economic activity this year and enable a recovery next year.”