Euro zone growth will be slower than previously expected with subdued inflation this year, according to the European Commission's latest economic forecasts. As Grace Pascoe reports, it's warning of high external and internal risks to the bloc's economy.
Slower growth in 2016 than 2015. That's what the European Commission now expects for the euro zone. Predicting GDP of 1.6 percent - down from 1.7. Inflation too is expected to dip - well below the ECB's 2 percent target. (SOUNDBITE) (English) EU ECONOMICS AND MONETARY AFFAIRS COMMISSIONER, PIERRE MOSCOVICI, SAYING: "Our protection for inflation in the euro area for 2016 has been revised downward to 0.2 percent." The 19-country bloc faces a range of risks Including oil volatility, slow growth in China and worsening geopolitical tensions. Closer to home - there's also Britain's June vote on EU membership. (SOUNDBITE) (English) IG, MARKET ANALYST, CHRIS BEAUCHAMP, SAYING: "You have seen stocks go down and indeed the euro go up. But for the time being I think we are sort of happy to say that the news is in the price. If we don't get a turn around later in the year, if we continue to see further downgrades that I think will really knock confidence and that's what investors are watching for at the moment." Euro zone factories did do slightly better in April - with PMI rising by point one to 51.7. (SOUNDBITE) (English) IG, MARKET ANALYST, CHRIS BEAUCHAMP, SAYING: "The PMI's will start to improve, again as we had with that first round of easing, the confidence comes first, and then the data begins to show an improvement as well. So for the moment we are not in a place we should be. There are still concerns about France. Very much concerned about Italy as well." The European Commission wants euro zone states to step up structural reforms - that's something France is struggling with. Its economy is expected to expand slightly. But Germany's will slow, as will Italy's.