The Commission's spring forecast confirms that the economic recovery is in progress in the EU. After having experienced the deepest recession in its history, the EU economy is set to grow by 1% in 2010 and 1¾% in 2011. This implies an upward revision of ¼ percentage point for this year from the Commission's autumn forecast, as the EU countries benefit from a stronger external environment. Nevertheless, weak domestic demand continues to restrain the recovery further out.

The speed of recovery is forecast varies across Member States, reflecting their individual circumstances and the policies they pursue. Labour market conditions have shown some signs of stabilisation recently, with the unemployment rate projected to peak this year at a lower level than forecast earlier, yet at close to 10% in the EU.

The temporary fiscal measures put in place have been key in turning the EU economy around, but also added to the public deficit, which is set to rise to 7¼% of GDP in 2010, before falling back slightly in 2011.

The economic recession came to an end in the EU in the third quarter of 2009, in large part thanks to the exceptional crisis measures put in place under the European Economic Recovery Plan, but also owing to some other temporary factors. Beyond the initial rebound, the recovery is proving more gradual than in past upturns. Like other developed countries, the EU will grapple with the legacy of the crisis for some time to come.

Gradual post-crisis recovery ahead

Although the near-term growth prospects remain subdued on the whole, a modest improvement is foreseen compared to the autumn forecast. This follows from the stronger rebound in global activity and trade at the turn of the year and an improved external outlook. Further out, the EU economy faces headwinds on several fronts that are set to hold back demand. The profile of this recovery is likely to be affected, to some extent, by a number of temporary factors, whether weather-related, cyclical or policy-induced.

With the fading-out of these effects, GDP growth is expected to regain ground more firmly by the end of 2010 only. This follows from the still very low level of capacity utilisation, deleveraging and heightened risk aversion that hold back investment, and subdued private consumption growth. Consumption growth is also constrained by weak wage and employment growth, and in a number of countries by the housing market correction.

Although substantial, the impact of the economic crisis on the EU labour market seems somewhat smaller than initially expected. This is explained by the use of short-term measures and labour hoarding in some Member States, but is also a result of past reforms. Signs of stabilisation have recently begun to emerge and the outlook is now somewhat improved compared to the autumn forecast.

Notwithstanding apparent signs of stabilisation, the labour‑market situation is projected to remain weak. Developments on this front will be of key importance to the recovery process in the EU and could be a potential source of both downside and upside risks, depending also on the effectiveness of policy measures.

On the other hand, the rebound in emerging markets and the resulting recovery of trade could boost the EU economy further, beyond what is currently expected. The recent upsurge in confidence (especially in manufacturing) points to some upside risks in the near term. A successful completion of the financial support to Greece can be expected to increase investor and consumer confidence. Risks to the inflation outlook are also broadly balanced.

Full forecast document is available at Commission's DG Economy and Finance website.

The commission usually publishes economic forecasts four times a year - comprehensive spring and autumn forecasts and smaller interim forecasts in February and September. The last interim forecast, issued in February, defined the economic recovery as "still fragile".