The euro zone economy will shrink by 0.4 percent this year and grow 1.2 percent next year, the European Commission said on Friday, but the recovery is expected to be too slow to reduce joblessness.
"Unemployment is forecast to reach 12 percent in the euro area in 2013 and to stabilize at these levels in 2014, while differences across member states are expected to remain very large," the Commission said in a statement.
It also warned that in light of the weak outlook for economic activity, the debt-to-GDP ratio is forecast to reach 95.5 percent in the euro area.
The crisis appears to be taking its toll on northern Europe in the latest forecasts. Growth for the German economy is projected to slow this year to 0.4 percent from 0.7 last year, while France is forecast to enter a recession this year, with GDP down 0.1 percent against 0.0 percent last year. GDP in the Netherlands is expected to fall 0.8 percent this year.
Meanwhile economic activity in Italy is set to decline again in 2013 as reduced disposable incomes, low confidence and difficult financing conditions continue to weigh on consumption and investment, the Commission said. In Spain, the economy is expected to contract by 1.5 percent in 2013.