BRUSSELS (AFP) - The global financial crisis is pushing the whole European Union into recession, official forecasts showed Monday, as South Korea unveiled its own 8.5 billion dollar stimulus package against the turmoil. The European Commission forecast a short shallow recession for the 27-nation European Union, predicting its combined economy would shrink 0.1 percent in both the third and fourth quarters of 2008. "The economic horizon has now significantly darkened as the European Union economy is hit by the financial crisis that deepened during the autumn and is taking a toll on business and consumer confidence," said EU Economic Affairs Commissioner Joaquin Almunia. The forecast by the EU's executive arm also said the economy of the 15 nations that use the euro shrank 0.2 in the second quarter and is set to contract by 0.1 percent in both the third and fourth quarters. It is the first time that the eurozone has slumped into recession " broadly defined as two consecutive quarters of economic contraction " since the single currency was introduced in 1999. In the face of sharply slowing growth, the commission forecast unemployment would return as a major headache after a steady decline in recent years. It predicted that the unemployment rate in the eurozone would creep up from a record low of 7.2 percent in March to 8.7pc in 2010. The impact of the slowdown was highlighted by a year-on-year 7.3 percent fall in new car sales in France, according to official figures for October. The motoring sector employs, directly or indirectly, 10 percent of the French workforce, and companies have ordered massive production cuts, with several plants temporarily shuttered. Despite the grim forecast, Europe's main stock markets rose at the start of the working week. Nearing the half-way point, Frankfurt rallied 0.57 percent, London climbed 0.42 percent, while Paris nudged 0.02 percent lower. The European markets tracked similar gains in Asia, where Hong Kong's Hang Seng index closed 2.7 percent higher and Australian shares rose 5.06 percent by close. Tokyo was closed for a public holiday. Analysts said the markets were closely watching the lead-up to Tuesday's US presidential election, with polls giving Democratic hopeful Barack Obama a sharp edge over Republican rival John McCain. "We expect the new US president will become an integral force in policymaking even before his official inauguration in January," said Bank of America chief economist Mickey Levy. But despite the rises on the stock markets, fears of recession loomed large, with South Korea unveiling a stimulus package to cushion the blow of the financial crisis. The government in Seoul, saying it expected a significant slowdown in exports, promised an extra 11 trillion won (8.5 billion dollars) in spending next year as well as tax cuts of three trillion won to lift domestic demand. The strategy and finance ministry said the prospects of a swift turnaround in the global financial turmoil appeared dim, and reduced its economic growth forecast for 2009 to around four percent from close to five percent. The turmoil that started out in the US subprime mortgage credit crunch "is causing concern over a global economic downturn," the minister of strategy and finance, Kang Man-Soo, told reporters. British Prime Minister Gordon Brown said US leadership was central to restoring stability to the world economy, adding that "even more international cooperation" will be needed to counter financial turbulence in coming months. "The next stage of globalisation will require even more international cooperation, with American leadership central to its success," Brown told business leaders at an oil conference in Abu Dhabi. "In the coming weeks and months, the whole world will want to work closely with America on a shared common agenda".