The European Union has warned the debt loads of Greece, Ireland and Portugal will be much bigger than previously forecast, adding to fears that international bailouts are failing to solve the region’s crisis.
However, the bloc’s biannual economic forecasts paints a more optimistic picture of the economy of Spain - commonly seen as the next-weakest state in the euro zone - which supports the currency union’s hope that the debt crisis won’t draw in any other countries.
For the three countries that have already received or are about to get international help, debt is expected to remain a problem for some time.
The higher debt forecasts, combined with larger budget deficits and weak growth, boost the complaints of many economist that the bailouts are taking too hard a toll on economic activity and are not solving the debt problem.
Although Greece on Friday reported economic growth in the first quarter, its longer-term prospects remain grim, experts say.
Greece’s debt will reach 157.7 per cent of economic output this year and jump to 166.1 per cent in 2012, the European Commission, the EU’s executive, said in its forecast. That’s up from 150.2 per cent and 156 per cent respectively it predicted last autumn.
While expected, the significantly worse forecasts will likely spice up discussions among euro-zone governments on whether Greece will need a second bailout, after it was already granted  110 billion euros in rescue loans a year ago.
It will also add to calls from many economists that the country needs to restructure its debts - forcing private creditors like banks and investment funds to accept lower or lower repayments on the bonds they hold.
The situation does not look much better in Ireland, the second country to get bailed out last year. Ireland’s debt is expected to hit 112 per cent of gross domestic product this year before rising to 117.9 per cent in 2012.
That’s up from earlier forecasts of 107 per cent and 114.3 per cent. Its economy is predicted to grow a meagerly 0.6 per cent this year, while it will likely run a deficit of 10.5 per cent, up from 10.3 per cent forecast in the autumn.
The most severe revisions were made for Portugal, which at the time of the last forecast was still hoping to avoid a bailout.
However, after last year’s deficit turned out much bigger than expected and the government was defeated over austerity measures, Lisbon asked for help last month and finance ministers are expected to sign off on a  78 billion euro rescue package for the country on Monday.
Portugal’s debt will likely stand at 101.7 per cent of GDP in 2011 and increase to 107.4 per cent next year, the Commission said. That’s up from 88.8 per cent and 92.4 per cent previously.
The Portuguese economy will likely contract 4 per cent over the next two year, in line with what international exports examining the country’s books to prepare the bailout predicted last week. The deficits projections are also based on the targets set out in Portugal’s bailout program, 5.9 per cent this year and 4.5 per cent in 2012.
The bleak forecasts for the euro zone’s three weakest countries contrast with strong economic growth in the currency union’s large countries such as Germany and France, where GDP growth was revised up.
Even for Spain, the country that most economists say would seriously test the eurozone’s capacity to help its struggling members, there was some good news in Friday’s forecasts. Its debt load will reach 68.1 per cent this year and grow to 71 per  cent in 2012. That’s better than the 69.7 per cents and 73 per cent predicted last autumn.
AP