EU Economy Shows Signs of Emerging from Downturn

New forecasts show the European Union's economy growing at a faster pace than expected this year, suggesting the region is emerging from the global downturn. But, there are some hitches - notably the Greek crisis and Britain's high deficit.

Published by the European Commission, the EU executive arm, the new economic forecast predicts growth across the 16-nation eurozone area at 0.9 percent - slightly higher than the 0.7 percent previously predicted.

Poland and Slovakia are expected to lead the recovery for the 27-member European Union, with their gross domestic product predicted to grow 2.7 percent this year. The main growth drivers: exports and investments.

EU Economic Commissioner Olli Rehn hailed the good news, but offered some caveats, one of the biggest - the Greek economic crisis.

"This year is certainly good news for Europe," said Olli Rehn. "But we must now ensure that growth will not be derailed by Greece's relative financial instability."

The European Union and the International Monetary Fund recently unveiled a massive bailout package for debt-ridden Greece. But problems remain, not least Greek anger at government austerity measures. The country has been shaken by deadly riots amid a nationwide strike.

The European Commission report predicts Athens will bring its deficit down to 9.8 percent of GDP this year - compared to 13.6 percent in 2009. But Rehn acknowledged that does not appear to have calmed the markets.

"No one can deny there are tensions in the financial markets, but also in the financial markets there is significant overshooting," he said.

Rehn noted that two other shaky economies, Spain and Portugal, were taking steps to consolidate their public finances. But he said while the Greek case is unique, the fallout of jittery markets could also affect Madrid and Lisbon.

The European report also finds Britain's public deficit level will likely hit 12 percent of its GDP in 2010, gloomy news as the country prepares for national elections. That will make Britain's public-deficit level the highest among EU nations. Britain's debt is also expected to amount to 79.1 percent of its GDP - high, but in line with other EU nations recovering from the downturn.