EU slashes eurozone growth forecast to 0.5%

The European Union has slashed its 2012 growth forecast for the eurozone by 1.3% as the European Commissioner warns the risk of a new recession has increased.

Growth is predicted to be just 0.5% next year, down from previous forecasts of 1.8%, according to the BBC, making it harder for Europe to work its way out of the debt crisis.

European Commissioner Olli Rehn said: "Growth has stalled in Europe and there is a risk of a new recession."

The cut comes just a day after Italian 10-year government bond yields soared through the critical level of 7%. Today they have come down but remain at 6.7%.

The European Commission also said if there was no change in political policy in Italy, the debt to GDP would remain at 120.5% next year before falling to 118.7% in 2013.

It also forecast Greece would see its debt level rise to 198.3% of GDP next year.