European Union, Euro Zone | featured news

The European Union's official economists predicted the euro-zone economy will shrink in 2013 for the second year in a row and for the third year of the past five, in a forecast that sees little hope that easing financial-market tensions in the region will provide a jolt to the real economy any time soon.

In spite of years of harsh spending cuts and tax increases, Europe's debt problems are getting worse. Figures from the EU's statistics office Wednesday showed that, at the end of the second quarter, the total government debt of the 17 countries that use the single currency was worth 90 percent of the group's total economic output for the year - the highest level since the euro was launched in 1999.

Britain is pushing for changes to a proposed euro zone banking union to dilute the power of the European Central Bank, EU officials said, potentially hampering efforts to build the infrastructure urgently needed to underpin the euro.

European Union officials pushed on Saturday to accelerate moves to stem the bloc's long debt crisis as Italian premier Mario Monti warned that economic suffering was fuelling divisive nationalism on the continent.

Spain has for the first time conceded it might need a full EU/IMF bailout worth 300 billion euros ($366 billion) if its borrowing costs remain unsustainably high, a euro zone official said.