Updated: 02/22/2013 23:31 | By Agence France-Presse

EU sees recession, record dole queues right through 2013

The eurozone is staring at another full year of recession in 2013 with unemployment likely to surge above the 20-million mark and France in particular overshooting key fiscal targets, the EU warned on Friday.


Economic output across the 17-state currency area -- home to about 340 million people and a global rival to the United States, Japan and emerging giants -- will shrink by 0.3 percent this year after a 0.6-percent contraction last year, the European Commission said.

Millions more people face losing their jobs, with already record unemployment expected to rise markedly right into 2014.

Under pressure from Brussels, national governments face a tricky balancing act getting their finances in order without exacerbating social unrest and aggravating the recession by too many spending cuts.

Like Spain before it, France can expect some leeway on its fiscal targets so as to avoid overly-tough austerity cuts and reforms such as those imposed on bailed-out Greece, analysts said.

But the margin may not be so great given possible friction with Germany, the ultra-disciplined eurozone powerhouse and guardian, set for 0.5-percent growth.

"We must stay the course of reform and avoid any loss of momentum," EU economic affairs commissioner Olli Rehn said, arguing that the drag on growth and spike in joblessness was a natural consequence of "the ongoing rebalancing of the European economy."

The EU's winter economic forecast said there would be no return to growth for the debt-laden monetary union until 2014, when the economy should gain 1.4 percent.

Unemployment will meantime hit 12.2 percent for 2013 and remain little changed next year after 11.4 percent in 2012 when the jobless totalled nearly 19 million.

Much of the attention was on France where the public deficit is set to come in at 3.7 percent of output this year and 3.9 percent next year.

The eurozone's second-biggest economy, France had said it would this year get back within the EU's deficit ceiling of 3.0 percent, even if Brussels a few months ago had forecast a deficit of 3.5 percent.

---- French reforms of 'primordial importance' ----

The larger-than-expected shortfall means Socialist President Francois Hollande will be looking to Brussels to get the targets eased.

French Minister Pierre Moscovici said the "conditions were right" for seeking a delay, stressing that France did not want to "add austerity to the recession."

France will practically flatline this year with 0.1 percent growth, and Rehn said a French request to put the targets back could be looked on favourably.

"If the expected negative economic headwinds bring significant, unfavourable consequences for public finances, the (EU's) Stability and Growth Pact allows for the deadline to be pushed back to 2014," he said.

However, he also warned that it was of "primordial importance" for the eurozone as a whole that France "carries through sufficient and convincing measures and reforms," including, to its hugely costly pensions system.

Chris Williamson of London-based Markit, whose surveys of private businesses provide a vital gauge of economic trends, said governments could expect a softer approach from EU partners after tens of thousands of protesters took to the streets of Athens and Brussels this week.

"This will clearly help to ease some of the political and social tensions that are apparent," he said.

It would, however, in turn mean "more pressure on the European Central Bank to provide a further boost of stimulus," or a rate cut to encourage High Street lending in a bid to oil the wheels of recovery.

The ECB last year opted to stand behind eurozone governments in a largely successful bid to tame their borrowing costs, a move most say may have turned the tide in the debt crisis.

The eurozone's core German and French economies have embarked on very different trajectories.

Germany grew 0.7 percent in 2012, achieving a 4.2-billion-euro budget surplus for the first time in five years of financial crisis, and is forecast to power back with 2.0-percent growth in 2014, nearly twice the French rate.

Across the full, 27-state EU, which also includes big players in Britain and Poland, growth is expected to be 0.1 percent this year and 1.6 percent next year.

But Britain's debt-to-GDP ratio -- tipped to hit 97.9 percent of GDP in 2014 -- left Rehn flagging a likely need for "additional measures" to strengthen the country's public finances.

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