The European Commission says the 15 countries using the euro are in a shallow recession in the face of the worst financial crisis in generations.
The slump marks the first recession, which economists define as two quarters running of economic contraction, since the eurozone was created in 1999.
In a broad downgrade of its forecasts, the commission estimates the eurozone economy would expand 1.2% for 2008 before slowing to only 0.1% in 2009.
The commission also forecast that annual inflation in the eurozone would reach 3.5% in 2008 before easing to 2.2% in 2009 and 2.1% in 2010.
Unemployment is forecast to return as a major headache after a steady decline in recent years.