The European Commission today cut its 2008 eurozone growth estimate to 1.3 per cent from 1.7 per cent previously and forecast the bloc would just barely escape a recession this year.
Buffetted by high energy prices, weak global economic activity and financial market turmoil, the eurozone is headed for a sharp slowdown from the solid 2.6 per cent growth it saw last year.
After the economy of the 15 nations sharing the euro contracted 0.2 per cent in the second quarter, the commission predicted it would stall in the third quarter and expand only 0.1 per cent in the final three months.
If the forecast bears out, it would mean that the eurozone will be spared a recession, which economists define as two consecutive quarters of contracting economic activity.
However, the European Union's executive arm forecast a recession this year in European economic heavyweight Germany as well as Spain and Britain, which is not a member of the eurozone.
"The continuation of the turmoil in the financial markets one year on, the near doubling of energy prices over the same period and the correction in some housing markets have had an impact on the economy," EU Economics Commissioner Joaquin Almunia said.
However, he added that "the recent fall in oil and other commodity prices and the easing up in the euro exchange rate have provided some relief."
Oil prices have steadily fallen to about $100 a barrel after hitting a record close to $150 a barrel in July while the euro has also lost ground, falling from a record $1.60 in July to about $1.41.
