The European Union said today it is facing a "deep and protracted recession" with government spending the only source of growth. The 16 nations that use the euro will shrink 1.9% in 2009, with the entire EU contracting 1.8%, the European Commission forecasts. The EU will lose 3.5 million jobs as business and household spending falls and lending slows.
Government demand and investment will be the only source of growth—but that carries a heavy price tag. Government deficits will hit the highest level in 15 years as they borrow heavily to stoke growth. The EC says the economy would be faring much worse without current EU nations' plans to boost growth by spending 1% of gross domestic product this year.