The European Central Bank Thursday slashed its forecast for growth in the eurozone for both this year and next, it said, as the debt crisis increasingly takes it toll on the 17-nation bloc.

The ECB said its staff expects the economy to shrink by 0.4 percent in 2012 and then grow by 0.5 percent in 2013, a reduction from its previous call in June of minus 0.1 percent for this year and plus 1.0 percent next year.

The bank also raised its forecast for inflation, estimating that prices would rise by 2.5 percent in 2012, up from a June forecast of 2.4 percent.

Next year, prices were seen rising by 1.9 percent, compared with the 1.6 percent forecast issued three months ago.