Eurozone faces 'mild' recession in 2012, says E&Y

The eurozone faces a "mild" recession in the first half of next year, restricting full-year economic growth in the region to just 0.1%, according to Ernst & Young.

The audit firm said investors remain concerned about the commitment of the eurozone leaders to reform despite the European Union (EU) summit earlier this month.

However, Ernst & Young said it did expect eurozone growth to recover in 2013, to somewhere between 1.5% and 2%.

"The reforms agreed at the summit on 9 December were a step in the right direction and the response seems to have been mildly positive," writes Ernst & Young.

"Yet investors remain very concerned about the commitment and ability of eurozone governments to implement reforms quickly."

Meanwhile, Greece said it would have its worst recession ever in 2011.

Prime Minister Lucas Papademos warned his country's contraction would be greater than the 5.5% currently forecast.

Greece's economy shrank by 4.5% in 2010, when it received its first bailout from the EU and International Monetary Fund.

Last week, every EU nation bar the UK backed new fiscal rules to keep budgets in line.

But fears remain the budget pact will still not be strong enough to prevent more countries from seeking a bailout.