The EU Commission has warned that the eurozone is heading for its second recession and has lowered its growth forecast for 2012.
The Commission forecasts that economic output in the 17 nations sharing the euro currency will contract by 0.3% this year, compared with its previous forecast of 0.5% growth.
The EU's Executive also said that the wider European Union, which represents 27 nations and generates a fifth of global output, will not manage any growth this year.
Germany's growth is expected to fall to 0.6%, and France to 0.4%.
Troubled Greece will enter its fifth year of economic contraction, with negative growth of 4.4%.
The economies of Spain and Italy, which saw their financing costs pushed up to near-unaffordable levels last year, will shrink by around 1%.
Only UK growth is expected to stay unchanged at 0.6%.
Economic and monetary affairs commissioner Olli Rehn made it clear that heavily-indebted countries must meet strict budget targets even as their economies stall.
He said: "Member states facing close market scrutiny should be ready to meet budgetary targets."
The Commission also insisted budget cuts were the way to regain investor confidence.
Mr Rehn said: "Negative feedback loops between weak sovereign debtors, fragile financial markets, and a slowing real economy do not yet appear to have been broken.
The eurozone was last in recession in 2009. The area's economy contracted by 4.3% during the deepest global slump since the 1930s.
EU leaders hold a summit in Brussels next week where investors hope they will agree to raise the ceiling of the eurozone's joint rescue funds and pave the way for more IMF funds to stand behind heavily indebted southern European economies.
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