Global Economy, Euro Zone | featured news

Italian President Giorgio Napolitano expressed despair on Tuesday at fierce criticism of his latest plan to end a post-election deadlock that has raised fears of months of instability in the euro zone's third largest economy.

Unemployment in the euro zone rose to yet another record high in the first two months of the year, official data showed Tuesday, providing confirmation that the economy remains in a deep freeze.

As it tries to play Russia off against Europe to salvage its economy, Cyprus has embarked on a high-stakes poker game that could see almost everyone lose.

Homeowners have told of how sales of their properties are on hold and businesses have called for clarity amid banking uncertainty in Cyprus. The country is braced for an emergency session of its parliament, and a planned vote, regarding a 10bn euro ($13bn; £9bn) financial rescue.

Italy's new parliament met on Friday for the first time since last month's inconclusive election with no sign of a deal to end the stalemate and yield a government able to address the deep problems in the euro zone's third-largest economy.

Europe has spent hundreds of billions of euros rescuing its banks but may have lost an entire generation of young people in the process, the president of the European Parliament said.

The data is likely to put pressure on the European Central Bank to cut interest rates at its next meeting.

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.

Even as the euro zone periphery starts to spy some glimmers of hope, concern is mounting that Germany is drifting apart from other countries at the core of the single currency bloc, notably France.

The vast U.S. services sector expanded against last month, extending a three-year run of growth, while European business optimism hit an eight-month high, suggesting the euro zone economy was starting to recover.