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European Commission tweaks '14, '15 forecasts

BRUSSELS--The European Commission tweaked its 2014 and 2015 economic forecasts Monday but left intact the overall outlook for gradual recovery from a record recession.

The Commission stressed again the need for all member states to stick to the reforms and measures agreed to tackle the global slump and ensuing debt crisis, saying this was vital for continued growth.

The 18-nation eurozone economy will grow by 1.2 percent this year, as previously estimated, it said, while cutting its 2015 forecast to 1.7 percent from 1.8 percent.

The full 28-member European Union economy will expand 1.6 percent in 2014, up from the previous estimate of 1.5 percent, and grow 2.0 percent in 2015, unchanged from the earlier forecast.

The estimates rest “on the assumption that the agreed policy measures will be implemented ... taking forward” steps to stabilize the public finances and open up the economy, the Commission said.

“The recovery has now taken hold. Deficits have declined, investment is rebounding and, importantly, the employment situation has started improving,” acting Economic Affairs Commissioner Siim Kallas said in a statement.

“Continued reform efforts ... are paying off,” Kallas said.

Among member state economies, the Commission forecast Germany to expand 1.8 percent and 2.0 percent respectively this year and next, unchanged from its February estimates, while France was seen lagging behind, on 1.0 percent and 1.5 percent, compared with February's estimates of 1.0 percent and 1.7 percent.

Italy will expand 0.6 percent and 1.2 percent, unchanged, while Spain will gain 1.1 percent and 2.1 percent, much better than the previous 1.0 percent and 1.7 percent.

Non-euro Britain easily outpaces its eurozone partners with growth of 2.7 percent and 2.5 percent, revised up from 2.5 percent and 2.4 percent.

The U.S. economy in comparison is expected to grow 2.8 percent this year and 3.2 percent in 2015.

Low Inflation, Slow Job Gains

With the eurozone economy just moving along, inflation will continue at a low level — at 0.8 percent in 2014 and 1.2 percent in 2015, well short of the European Central Bank's target of just under 2.0 percent, and down from the previous forecast made in February for 1.0 percent and 1.3 percent, respectively.

Recent low inflation rates have sparked concerns the eurozone faces the threat of deflation — when prices fall in absolute terms, undercutting demand and jobs to put the wider economy at risk.

“While current price developments reflect both external factors and the ongoing adjustment process, a too prolonged period of low inflation could also entail risks,” the Commission said.

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