The New Nation - Internet Edition

BBC Online

The UK, Germany and Spain will fall into recession in 2008, the European Commission has predicted.

Brussels said the three countries would see two negative quarters of economic growth in a row, which is the technical definition of a recession.

In its latest economic forecast, the commission also downgraded its outlook for eurozone growth again.

It said the eurozone would now grow by 1.3% this year, against previous projections of 1.7%.

Earlier this month, data showed the region's economy shrank by 0.2% between April and June - the bloc's first decline since its creation in 1999.

The contraction was driven by a slowdown in exports and consumer spending.

But high inflation in the region led policy makers at the European Central Bank to keep interest rates at 4.25% at its latest meeting, allowing no relief for the eurozone's slowing economies.

In its latest report, the commission believed that inflation was now likely to creep up to 3.6% in the eurozone - above its previous predictions of 3.2% and way above the government's target of 2%. Gloomy outlook

Shaken by a housing slump and volatile financial markets, the Brussels-based organisation predicts that the UK economy, which is not a member of the eurozone, will shrink by an annual rate of 0.2% in each of the next two quarters.

A second quarter of negative growth is also expected in the German and Spanish economies, which are expected to contract by 0.2% and 0.1% respectively.

The grim outlook echoes forecasts from the Organisation for Economic Cooperation and Development (OECD) out earlier this week, which were even worse.