European Union officials have slashed their growth forecast for the 19 countries that use the euro, saying even the reduced estimate was vulnerable to "large uncertainty" from slowing growth in China and weakening global trade.
The EU's executive commission cut the forecast for this year to 1.3 per cent from 1.9 per cent in their earlier forecast issued in the autumn.
"Subdued" economic momentum has prompted the European Commission (EC) to revise its growth forecasts for 2019, trimming nearly one-third of the formerly predicted growth. That said, several of the EU's larger members are expected to experience a noticeable slowdown in their economies with both France and Germany becoming increasingly concerned about their budget policies and Italy officially entering into a recession.
The Commission cited global trade tensions and China's slowdown as the main drags on the European Union's economy.
"A high level of uncertainty surrounds the economic outlook", the forecast report said.
The EU also cut Italy's growth rate to a five-year low, a situation that risks reopening bitter differences between Brussels and Rome about the government's spending plans this year.
President Donald Trump said on Thursday (31 January) he wanted a "very big deal" United States trade deal with China, but signaled there could be delays if negotiations fail to meet his goals of opening the Chinese economy broadly to United States industry and agriculture.
UK Prime Minister Theresa May is battling to secure a deal but the House of Commons rejected her withdrawal pact and European Union leaders have said they will not renegotiate it. If no deal is approved, that raises the possibility of an exit without a framework on how cross-border trade would be conducted as the two sides seek a new, long-term trade deal.
The Commission said euro zone growth will slow to 1.3 percent this year from 1.9 percent in 2018, before rebounding in 2020 to 1.6 percent. "Nonetheless, Europe's economic fundamentals remain solid".
The executive explained that the deceleration of the European economy in the second half of a year ago was more intense than expected, while the "high uncertainty" across the planet also impacted the global output.
One notable downgrade was Germany, the biggest economy in the Eurozone. Germany's expansion was further slowed by what it is hoped were temporary troubles in the auto industry.
The European powerhouse was particularly hit by the disruption of its automotive industry last autumn, as its auto industry struggled to win new certifications under a new emission testing procure.
The commission cut its 2020 forecast for the Eurozone to 1.6 per cent from 1.7 per cent in the autumn forecast.
European Commissioner for Economic and Financial Affairs Pierre Moscovici presents the EU executive's economic forecasts during a news conference at the EU Commission headquarters in Brussels, Belgium February 7, 2019.