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EU slashes eurozone growth forecast as Germany cools

AFP  |  Brussels 

The sharply cut its growth forecast for 2019 on Thursday as an unexpected slowdown in and protests in weigh on the economy in

The EU also cut Italy's growth rate to a five-year low, a situation that risks reopening bitter differences between and about the government's spending plans this year.

The commission, the EU's arm, is now expecting growth of 1.3 per cent in the this year, a significant cut from 1.9 per cent predicted in November. It said the full would grow by 1.5 per cent instead of the earlier 1.9 per cent.

The health of the German economy is fast emerging as a worry for the EU as slumping demand for foreign cars in takes a toll on Europe's export powerhouse.

The commission said is facing international headwinds that have now taken the steam out of a post-crisis recovery in the

The slowdown "reflects external factors, such as trade tensions and the slowdown in emerging markets, notably in China," said

"The possibility of a disruptive Brexit creates additional uncertainty," he added.

Another problem is Italy, which the commission said would grow by a paltry 0.2 per cent this year, still better than a recession, but a huge cut from the 1.2 per cent forecast late last year.

Slower growth spells big trouble for populist-led Italy, where huge amounts of government money are swallowed up each year to help pay down about two trillion euros in public debt.

Rome's coalition government of the anti-establishment Five (M5S) and the was already forced to water down its ambitious budget in December to avoid being punished by the and financial markets.

The latest growth forecast may force to again review its spending plans for 2019 in order to satisfy and assuage investors.

"The commission will continue to monitor closely the situation in Italy," said EU Pierre Moscovici, who handles the fraught negotiations with

Moscovici, a former French minister, warned that was also caught in the cooldown, especially after a wave of "yellow jacket" protests hit the country in December. In France, the European now expects growth of 1.3 per cent in 2019, compared to 1.6 per cent in its autumn forecasts.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, February 07 2019. 21:50 IST