Britain enters mild recession, blames EU

LONDON (AP) — The British government blamed the euro crisis for a big downgrade of the country’s growth projections and warned that it will only achieve its deficit-reduction goals if European leaders deliver a big, bold solution soon.

Britain’s Treasury chief George Osborne said Tuesday that Europe’s third-largest economy was being buffeted by the slowdown in the eurozone. Though Britain retains the pound, having opted out of joining the euro, around 50 percent of the country’s exports go to the 17-nation eurozone.

“If the rest of Europe heads into recession, it may prove hard to avoid one here in the U.K.,” Osborne told the House of Commons.

A number of economic indicators have shown that the eurozone is heading for recession in the wake of a crippling debt crisis that’s shown alarming signs of spreading from the relatively small economies of Greece and Ireland to much-bigger Italy and Spain.

Given the sharp deterioration in the eurozone, Osborne said the government was “undertaking extensive contingency planning to deal with all potential outcomes of the euro crisis.”

Osborne told lawmakers that the independent Office for Budget Responsibility now expects Britain’s GDP to grow by 0.9 percent this year, around half the 1.7 percent rate predicted in March. For next year, the OBR predicts growth of 0.7 percent, sharply down from the 2.5 percent prediction in March.

Its forecasts are in line with the Bank of England though slightly better than Monday’s projection by the Organization for Economic Cooperation and Development that showed Britain already slipping into a mild recession.