Is EU Headed Toward A Recession After Brexit Vote? European Commission Predicts Economic Growth Will Shrink [VIDEO]

The European Commission has revised down its forecasts for growth in the euro zone and in Britain after the British vote to leave the European Union, in estimates unveiled by the economic affairs commissioner Pierre Moscovici.

Britain will be hit harder after the June 23 vote to leave the European Union, the Commission forecast, predicting lower growth in 2016 and a possible recession next year.

"ECFIN staff has prepared a first assessment of the near term impact of the situation, which is very close to what the IMP published last week. We expect the increased uncertainty to reduce UK GDP by 1 to 2½ percentage points by 2017 compared to the baseline scenario of remaining. And also in the EU, rest of the EU and the euro area, it will be about 0.2 and 0.5 percent," he told reporters after the first post-Brexit meeting of euro zone finance ministers in Brussels.

"The longer the uncertainty lasts, the costlier it will be for the economy. So, once again, it's essential as we see a very important acceleration of the change in Great Britain with the arrival of Madame May by Wednesday, it is essential both for political and economic reasons, that we continue calling for a clarification of the situation as soon as possible," Moscovici added in reference to the lastest UK developments in the aftermath of the Brexit vote.

Interior minister Theresa May will become Britain's prime minister on Wednesday, July 13, with the task of steering its withdrawal from the European Union.

The European Commission also began formal disciplinary procedures against Spain and Portugal for their excessive deficits in 2014 and 2015.

"The euro zone members tomorrow in Ecofin will vote to support the Commission's recommendation unanimously. Second, we didn't discuss the substance of what happens next -we all know what happens next, it triggers automatically the procedure about sanctions and that has to be put forward by the Commission, I believe within 20 days, and there needs to be a decision on the future effective action of the countries involved. What was said in the Eurogroup and the Commission also pointed it out, is that it could be useful to do all of these quickly and if possible in one go," Eurogroup chief Jeroen Dijsselbloem said.

Both countries had deficits greater than the European Union's limit of 3 percent of gross domestic product in the past two years and failed to correct the deficits quickly enough.

That triggered a process that may further complicate both the fiscal and the political situation in each country. Even if the fines are cancelled, some of the EU funds committed to Spain and Portugal are likely to be suspended for at least a year in the event of a sanction decision. So the two countries may have to do with less funding just as they are trying to make ends meet.