The European Commission has cut its economic forecasts for the euro zone. As Sonia Legg reports, figures show a weaker economic recovery than previously expected.
There's a new team in charge at the European Commission. The change is being heralded as a new start for Europe - if only that could be said about the region's economy. Latest predictions are for a revised down 0.8% growth this year and 1% next. France is one of the big worries - ironic then that the man delivering the bad news was until recently the country's finance minister. (SOUNDBITE) (English) EU COMMISSIONER FOR ECONOMIC AND FINANCIAL AFFAIRS, PIERRE MOSCOVICI, SAYING: "The economic recovery is clearly struggling to gather momentum in much of Europe. We believe that it is essential that all levels of government assume their responsibility and mobilise both demand-and supply-side policies to boost growth and employment." Germany has been holding things together in recent years but even the euro zone's power house is slowing. But that doesn't mean it's ready to change its ways in order to boost growth. (SOUNDBITE) (German) GERMAN CHANCELLOR, ANGELA MERKEL, SAYING: "In our view, the view of the German government, investment is needed but not with new borrowing." The Commission acknowledged that Germany can't achieve anything alone. (SOUNDBITE) (English) EU COMMISSIONER FOR JOBS, GROWTH, INVESTMENT AND COMPETITIVENESS, JYRKI KATAINEN, SAYING: "Europe will not survive if there's only one engine - or two or three engines, and it means that we have to reform our society so that all member states are competitive enough." Two key engines are certainly not firing on all cylinders. Italy's economy is contracting and France is stagnating - it also lacks the political will to carry out the necessary reforms, says IG's Alastair McCaig. (SOUNDBITE) (English): ALASTAIR MCCAIG, MARKET ANALYST, IG INDEX, SAYING: "The fact that the French government had to go back to the drawing board as far as the French budget was concerned shows how uninspired it was rather falling between the Left and the Right appeasing nobody and certainly not embarking on the sort of austerity and landscape changes that I think markets would like to see." Unemployment and low inflation are two main concerns. And with oil prices showing no sign of going up inflation isn't likely to improve any time soon. That leaves some governments with a problem: reform too much and upset the voters - not enough and risk a continued slowdown.