Europe’s economy is fragile and headed for a year of weak growth, says an economic forecast from the European Commission.

The region’s gross domestic product is set to rise just 0.7 per cent in 2010, with inflation increasing by 1.4 per cent.

The bloc’s seven largest economies account for about 80 per cent of its economic activity. Spain remains the only large state where a further contraction, 0.6 per cent of GDP, is forecast for this year, as the housing sector continues to undergo a major adjustment. However, Poland was the only member state where growth remained positive throughout 2009 – and it is forecast to show growth of 2.5 per cent this year.

Disinflation trends seen in 2009 have ceased to exist, says the report, but financial market turbulence, potentially leading to higher borrowing costs for European businesses later this year, is still of concern.