BRUSSELS — EUROPE’S economy will continue to recover through next year, but at a subdued pace that will leave unemployment near record highs, the European Commission said yesterday.

The Commission, the EU’s executive arm, said rising business confidence and strengthening domestic demand are expected to underpin the recovery as governments also slow the pace of austerity measures such as spending cuts and tax increases.

“There are increasing signs that the European economy has reached a turning point,” said the EU’s Commissioner for Economic and Monetary Affairs, Olli Rehn.

Growth, however, is likely to remain too weak to generate many new jobs.

The European Union’s economy is expected to grow 0.5 per cent over the second half of the year, leaving it flat for the whole year, and expand 1.4 per cent in 2014, according to the Commission’s fall forecast. Its last predictions, issued in May, had expected a drop of 0.1 per cent in 2013.

The 17-country eurozone is forecast to continue its recovery from recession, from which it emerged in the second quarter. However, over 2013 as a whole, the eurozone is still expected to record a decline of 0.4 per cent. For next year, the Commission is penciling in 1.1 per cent growth, downward marginally from its previous forecast of 1.2 per cent.

Rehn said governments’ deficit reductions and reforms “have created the basis for recovery”. But the forecasts show that will do little to alleviate the plight of the jobless.

Unemployment in the eurozone is expected to remain at its record high of 12.2 per cent this and next year, dropping only modestly to 11.8 per cent in 2015.

In the wider, 28-country EU, which includes members like Britain and Poland who don’t use the euro currency, unemployment is expected to dip from 11.1 per cent in 2013 to 11 per cent next year.

Furthermore, despite the recovery, the eurozone’s economic output remains about three per cent below the level recorded in 2008, when the global financial crisis was entering its most acute phase and Europe’s debt crisis hadn’t yet started, the report said.

“It is ridiculous to celebrate GDP growth — or non-growth — of 0.0 per cent as a clear sign of recovery,” said Hannes Swoboda, the center-left minority leader in the European Parliament.

He scolded the Commission for favouring “obsessive deficit reduction” that suffocates growth. Instead, he advocated a more balanced approach that would not reduce deficits as quickly, allowing for greater investment and job creation.

Rehn acknowledged, “It is too early to declare victory; unemployment remains at unacceptably high levels.”

The Commission expects Spain and Greece to return to tepid growth next year after seeing a contraction this year. But unemployment is forecast to stay above 26 per cent in Spain through the end of next year, and to drop only slightly in Greece, from around 27 per cent now to 26 per cent.

The forecast for France, the bloc’s second-largest economy, suggested President Francois Hollande’s Government might have to pass more austerity measures to meet the EU budget deficit target. The EU has given France two more years to bring its budget deficit below three per cent of GDP, but the new forecast puts it as 3.7 per cent in 2015.

Spain, which also secured a deadline extension this year, still seems far off with a projected budget deficit of 6.6 per cent in 2015.

Using new powers given to the European Commission to avoid a repeat of the debt crisis, Brussels is currently assessing the eurozone nations’ draft 2014 budgets. It will present its findings next week and can ask member states to amend their budgets to meet agreed targets.