By Jan Strupczewski BRUSSELS, Nov 3 (Reuters) - The euro zone is already in a technical recession and growth will come to a virtual standstill next year, the European Commission said on Monday, calling for coordinated European Union action to support growth. Euro zone finance ministers should discuss such coordination on Monday evening and again on Tuesday, when the rest of the 27-nation bloc's finance ministers join the monthly talks, Economic and Monetary Affairs Commissioner Joaquin Almunia said. "We need a coordinated action at the EU level to support the economy similar to what we have done for the financial sector," Economic and Monetary Affairs Commissioner Joaquin Almunia said presenting his twice-yearly economic forecasts for the EU. "National action is needed and national action is much more efficient when it is coordinated with a common vision and with a common discussion on who, when and how should strengthen investment or fiscal policy and structural reforms," he said. Economic growth in the 15 countries using the euro will slow to 0.1 percent next year from 1.2 percent expected this year, the Commission said. It forecast 0.9 percent growth for 2010. The slowdown will boost unemployment to 8.4 percent of the workforce next year from 7.6 percent seen this year and further increase to 8.7 percent in 2010, the Commission said. "European Union economies are strongly affected by the financial crisis, which is aggravating housing-market correction in several economies at a time when external demand is fading rapidly," it said. "While the important measures taken to stabilise financial markets have begun to restore confidence, the situation remains precarious and the risks to the forecasts significant," it said. The Commission estimates that euro zone GDP fell 0.1 percent in the third quarter of 2008 and will again shrink by 0.1 percent quarter-on-quarter in the fourth quarter after a 0.2 percent contraction in the second quarter. This adds up to two consecutive quarters of negative growth -- a definition of a technical recession. "The outlook remains bleak further ahead, with several of the EU economies in or close to a recession," the Commission said. "A relatively moderate, 50-basis point, further increase in risk premium and a tightening of credit availability for households, not any longer a remote possibility, can trigger an outright recession -- a decline of one percent in GDP in 2009 -- in the euro area," the Commission said. The Commission expects that the euro zone's three biggest economies, Germany, France and Italy, will not grow at all next year while the economies of Ireland and Spain will contract. "I would encourage member states' finance ministers to adopt a clear position (on common EU action) because I am convinced we need common action to help the recovery in the second half of 2009," Almunia said before the euro zone ministers' meeting. OUTLOOK BETTER THAN FOR U.S. The euro zone outlook is still better than for the United States, where the economy is to shrink 0.5 percent next year. The Commission expects Japan to contract 0.4 percent in 2009. In the whole European Union of 27 member states, Britain's economy will shrink 1 percent next year, the Baltic states of Estonia and Latvia will contract this year, and next and Lithuania will shrink in 2010, the forecasts showed. Euro zone inflation is likely to slow to 2.2 percent next year from 3.5 percent seen this year and decelerate further to 2.1 percent in 2010, the Commission forecast. The European Central Bank wants to keep inflation below, but close to 2 percent, but consumer-price growth was boosted by surging oil and food prices in the 12 months to mid-2008. The bank has signalled it may cut interest rates in November as inflation risks have diminished. The Commission also saw lower risks of second-round inflation effects, when prices and wages rise in response to the oil price jump. The Commission said that investment, which was a key driving force in the previous upturn, faced a particularly abrupt slowdown, reflecting the impact of weakening demand, a drop in investor confidence, tighter financing conditions for companies, and a lower availability of credit. Consumption was set to stay subdued even though real disposable income growth was set to rebound as the inflationary impact of higher commodity prices fades. Net exports, however, would contribute positively to GDP growth because imports would slow more than exports, partly thanks to the recent depreciation of the euro real effective exchange rate, the Commission said. (Reporting by Jan Strupczewski, editing by David Brunnstrom)

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