If you can wait two more years, the worst of the recession will be over, as European Union officials said there won’t be a recovery until at least 2011, with the bloc’s economy set to contract by 0.1 percent in 2010 following a worse-than-expected slump of four percent in 2009. The 16 countries which use the single currency, the Euro, are also expected to see growth contract by four percent in 2009 and 0.1 percent in 2010, the European Commission said. There are now signs that the worst is already past, and that economic activity will pick up again by 2012, EU Economic and Monetary Affairs Commissioner Joaquin Almunia said.

Recent indicators show that “the economy is no longer in free- fall, and we may be heading for a stabilisation,” Almunia said. In January, the commission predicted that the EU’s economy would contract by 1.8 percent this year before returning to a modest growth rate of 0.5 percent in 2010. That prediction was scrapped as the bloc’s five biggest economies all turned in grim economic data predicted for the next two years.

Germany, the EU’s economic motor, now faces a contraction of 5.4 percent this year. Italy’s economy is set to shrink by 4.4 percent, while Britain faces a fall of 3.8 percent, the Commission said. Germany has been hard hit by the collapse of its export markets, making its situation “particularly dramatic,” Almunia said.

While the trio is set to grow marginally in 2010, France and Spain face recessions stretching to 2011, with the French economy contracting by three percent in 2009 and 0.2 percent in 2010, and Spain facing falls of 3.2 percent in 2009 and one percent in 2010. Governments across the EU are set to smash through the bloc’s self-imposed rule limiting deficit spending to three percent of gross domestic product, with all four of the Eurozone’s biggest members - Germany, France, Italy and Spain - set to breach the barrier in the next two years. Britain’s deficit is set to soar to 13.8 per cent in 2010.

But while the commission is obliged to take the EU’s member states to task over their deficits, “We cannot look at this fact as if we were in normal times: a fiscal stimulus is necessary to get us out of this slump,” Almunia stressed. The storm also looks set to engulf previously robust economies in Central and Eastern Europe such as Poland, Slovakia, Romania, Bulgaria and the Czech Republic. As recently as January, the EU newcomers were tipped to record substantial growth. But according to the latest forecasts, all are set to go into recession this year as key markets in Western Europe and Russia collapse.

Slovakia, tipped in January to record growth of 2.7 percent this year, now faces a contraction of 2.6 percent. Romania, which was in January expected to record growth of 1.8 percent, now faces a four percent fall in economic output. Only Cyprus, of all the EU’s 27 member states, is set to record economic growth in 2009, the Commission figures say. The Baltic States, which once led the EU with double-digit economic growth, are now set to record double-digit contractions. Latvia’s economy is tipped to shrink by 13.1 percent this year.

However, the EU’s newcomers do face a crumb of comfort in the accompanying fall in inflation rates, a key indicator for assessing their readiness to join the Euro. The Czech Republic, the Baltic States and Poland all look set to fall back within the EU’s limits by 2010 as prices across the bloc stagnate. Overall EU inflation is tipped to fall to just 0.9 percent this year and rise to 1.3 percent in 2010, the Commission said. Almunia said that EU prices could even begin to deflate later this year, but that this would be a “temporary blip.”