The European Commission said the euro-zone economy will virtually grind to a halt next year as the debt crisis ravages southern Europe and gnaws at theeconomic performance ofexport-driven Germany .
The 17-nation euro economy will expand 0.1 percent in 2013, down from a May forecast of 1 percent, the commission said today. It cut the forecast for Germany, Europe’s largest economy,to 0.8 percent from 1.7 percent.
“Europe is going through a difficult process of macroeconomic rebalancing and adjustment which will last for some time still,” European Union Economicand Monetary Commissioner Olli Rehn told reporters in Brussels. The economy is “sailing forward through rough waters.”
The economic falloff may make it harder for European governments to pull Greece back from the brink and deal with a possible aid program for Spain, leaving the debt crisis to fester for a fourth year.
Technically, the euro area will avert a recession, defined as two consecutive quarters of contraction, though the overall economy will still shrink 0.4 percent in 2012, ending a two-year expansion, the commissionsaid
