The European Commission forecasts a contraction of nearly two per cent in 2009 as the 27 nation economy suffers a recession and severe contraction of job markets.

2008 was a year of marginal growth for the European Union - over one per cent growth in a period where many other economies saw large contractions, but, the economy is expected to lose just under two per cent in GDP this year. However, recovery is expected to begin near the middle of this year, says the Commission, albeit, not soon enough to prevent the large contraction.

A 9.2 per cent drop in investment combined with 9.3 per cent unemployment rate forecast for this year lends to the shrinking economy. Unemployment is expected to hit over 10 per cent in 2010, the first time since 1998.

The forecast also called for a 0.5 per cent growth in 2010 within the entire Union, indicating that brighter skies are ahead.

As the governments in the eurozone begin their recovery plans, the Union’s total deficit is expected to rise dramatically from 1.7 per cent of GDP in the previous year, to well over 4 per cent this year - a significant change, and a huge long-term cost to the economy.

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