The global financial crisis is pushing the whole European Union into recession, official forecasts said on Monday as South Korea unveiled its own $8.5 billion stimulus package against the turmoil.

The European Commission forecast a short shallow recession for the 27-nation EU, predicting the bloc's 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 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, according to forecasts by the EU's executive arm.

It is the first time that the eurozone has slumped into recession which economists broadly define 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 8.7 percent in 2010.

Despite the grim forecast, Europe's main stock markets rose at the start of the working week, with London's FTSE 100 index up 0.87 percent in early trade.

Frankfurt's DAX 30 advanced 1.32 percent while in Paris the CAC 40 gained 0.74 percent.