EU warns of possible recession in eurozone

The EU's economic watchdog, the European Commission, has warned that the 17-country eurozone could slip back into recession next year as the debt crisis shows alarming signs of spinning out of control.

Its central forecast is that the eurozone will grow by only 0.5 percent in 2012. That's way down on the 1.8 percent prediction it made in September.

The huge cut in the forecast comes as the eurozone's debt crisis has spread alarmingly to Italy, the single currency bloc's third-largest economy.

The interest rate on Italy's 10-year bonds has reached the same levels that forced Greece, Portugal and Ireland to request multibillion euro bailouts.

Italian PM Silvio Berlusconi has said he will resign once key reforms aimed at calming market turmoil are adopted. Reports suggest he could replaced by leading economist and former Commissioner Mario Monti - that helped calm the market mood on Thursday.

Greece, meanwhile, remains in political chaos as leaders have failed for several days to appoint an interim government, putting the country in serious danger of defaulting on its massive debts before the end of the year.

Image: Getty