Europe Is Edging Towards Recession, Debt Crisis More Unsolvable11 November, 2011, 0:50. Posted by Zarathustra
Tags: Economy, Euro Crisis, Europe
The European Commission has downgraded European growth forecast. The growth forecast for 2012 has been cut from 1.8% to a mere 0.5%.
Predictably perhaps, that the dilemma that Eurozone countries need austerity, but at the same time austerity kills growth, which makes deficits and debts dynamic even worse for the peripheral countries. And as the on-going debt crisis continues, there should be little wonder now that Europe is entering a recession, and the almost unsolvable debt crisis is getting even more unsolvable.
As the beginning remarks of the forecast points out:
The outlook for the European economy has taken a turn for the worse. Sharply deteriorating confidence and intensified financial turmoil is affecting investment and consumption, while urgent fiscal consolidation is weighing on domestic demand and weakening global economic conditions are holding back exports. Real GDP growth in the EU is now expected to come to a standstill around the end of this year, turning negative in some Member States.
Uncertainty has increased since the summer and is now extremely high. Accordingly, the downside risks have become very strong. If left unchecked, negative interactions between debt concerns, weak banks and slowing growth are likely to lead to a relapse of the EU economy into recession.
I did note that the Eurozone is finished, and for what ever reasons yesterday there was a report from Reuters which said that perhaps Germany and France are thinking about the core-Eurozone idea. Of course, that wouldn’t quite work in the near term (and it probably will not work anyway even in the longer term). But until few months ago, a break-up of Eurozone was still like a taboo among European politicians. Now, somebody is actually going around talking about this.
Meanwhile, S&P just reaffirm France’s AAA rating with stable outlook. The market is kind of relieved, but the longer term picture is still intact. Eurozone is finished.