Recession in the eurozone will last longer than expected, the EU Commission predicts

THE Irish economy will grow faster than anywhere else in the euro zone this year and next bar Malta, the European Commission forecast today.

The economy will expand 1.1pc this year and 2.2pc next year, the Commission added.

While the news for Ireland is good, the situation elsewhere is gloomy.

The Commission now believes that euro zone will not return to growth until 2014, reversing its prediction for an end to recession this year and blaming a lack of bank lending and record joblessness for delaying the recovery.

The 17-nation bloc's economy, which generates nearly a fifth of global output, will shrink 0.3pc in 2013, the Commission said, meaning the euro zone will remain in its second recession since 2009 for a year longer than originally foreseen.

The Commission, the EU executive, late last year forecast 0.1pc growth in the euro zone's economy for 2012, but now says tight lending conditions for companies and households, job cuts and frozen investment have delayed an expected recovery.

The Commission sees the euro zone economy growing 1.4pc in 2014, with a figure of -0.6pc for 2012.

"The improved financial market situation contrasts with the absence of credit growth and the weakness of the near-term outlook for economic activity," said Marco Buti, the commission's director-general for economic and monetary affairs. "The labour market... is a serious concern," he said, in a preamble to the Commission's latest forecasts.

The European Central Bank's promise last year to do what it takes to defend its common currency has removed the risk of a break-up of the euro zone, and member countries' borrowing costs have come down from unsustainable levels.

But the damage from the 2008/2009 global financial crisis and the ensuing euro zone debt crisis has been greater than expected on the real economy, with global demand for euro zone exports one of the few saviours in terms of generating growth.

Online Editors