Recession blues

Some 8.5 million jobs will disappear in the EU this year and next, more than wiping out the new jobs created in recent years. Unemployment will reach 11.5 percent by the end of next year, the commission said.

Skyrocketing unemployment will be accompanied by plunging exports through the end of 2010, the commission predicts. The EU said Monday that euro zone exports are “forecast to suffer one of the worst setbacks on record.”

Conditions have worsened

In January, the EU had predicted modest growth of 0.5 percent for the bloc next year. But that prediction has been scrapped as the bloc's five biggest members turned in grim economic data.

The commission now forecasts that the EU economies will shrink another 0.1 percent in 2010.

Germany, the EU's economic motor, faces a contraction of 5.4 percent this year. And Axel Weber, president of Germany's national bank, the Bundesbank, warned Monday that the country's GDP is unlikely to rise before the second half of 2010.

"From today's perspective, I don't expect positive growth rates before the second half of next year," Weber said at a tax advisory congress in Hamburg.

Stable financial markets are a pre-requisite for economic growth, Weber said, adding "there, adjustment processes are still in full swing."

European Economic and Monetary Affairs Commissioner Joaquin Almunia also said he hoped that the EU's economic outlook would begin to improve in 2010. Actions taken by governments and central banks "are expected to put a floor under the fall in economic activity this year and enable a recovery next year," Almunia said.

However, the government stimulus plans come at a cost. Public debt is expected to grow to an average 7.5 percent of gross domestic product in the EU next year.

No escape for Eastern Europe

The storm also looks set to engulf previously robust economies in Central and Eastern Europe such as Poland, Slovakia, Romania, Bulgaria and the Czech Republic.

As recently as January, the EU newcomers were tipped to record substantial growth. But according to the latest forecasts, all are set to go into recession this year as key markets in Western Europe and Russia collapse.

Slovakia, tipped in January to record growth of 2.7 percent this year, now faces a contraction of 2.6 percent. Romania, which was in January expected to record growth of 1.8 percent, now faces a 4-percent fall in economic output.

Of all the EU's 27 member states, only Cyprus is set to record economic growth in 2009, according to commission figures.