Advertisement

Eurozone slump fears worsen

A third recession in the eurozone could be on the cards, economic data continues to disappoint.

The latest developments in the eurozone have reinforced fears of a third recession in seven years. Industrial production in the bloc declined by almost 2% in August, with capital goods production falling by almost 5%.

Germany's ZEW economic sentiment indicator fell for a tenth successive month and the country's GDP growth forecast for 2014 was cut from 1.8% to 1.2%.

Advertisement - Article continues below

Meanwhile, markets were unimpressed with Greece's plan to leave its bail-out programme early and its bond yields jumped to a seven-month high on the news.

What the commentators said

The situation in the eurozone used to be that the core was strong, partly compensating for weakness in the periphery, said Wolfgang Munchau in the FT. Now both areas are weak. And policymakers show little sign of doing anything much about it. "Secular stagnation is not so much a danger as the most probable scenario."

It's not just that investors are worried the European Central Bank may not embark on quantitative easing (QE) money printing or that German resistance could delay QE until a Japan-style slump has already become entrenched.

It's also hard to see the "supposedly too-big-to-fail" economies of Italy and France getting their act together, said Allister Heath. Meanwhile, more turbulence in Greece could be on the way, said Paul Taylor in The International New York Times.

A likely early election next March could see the leftist Syriza party gain power on a platform of reversing austerity policies and demanding debt relief. This would be the first time a movement "deeply hostile" to an international bailout programme takes power in Europe, with unpredictable political and economic consequences.

In short, said Heath, it seems analysts could well have been wrong to think that "the ticking time-bomb under the European project had been defused".

Advertisement
Advertisement

Recommended

How long can the good times roll?
Economy

How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019
What the Latin Monetary Union – Europe’s forgotten currency – can teach us about the euro
Currencies

What the Latin Monetary Union – Europe’s forgotten currency – can teach us about the euro

The euro isn’t the continent’s first flawed single currency, says Jonathan Compton. The Latin Monetary Union lasted 61 years.
11 Jul 2020
Boris Johnson’s big Brexit plan
Brexit

Boris Johnson’s big Brexit plan

The prime minister needs to get Brexit done, and get the economy growing – particularly for first-time Tory voters. Can he manage all that while negot…
15 Jun 2020
European assets bounce as the eurozone's economy turns upwards
European stockmarkets

European assets bounce as the eurozone's economy turns upwards

Both the euro and European stocks have rallied strongly in the last few days.
12 Jun 2020

Most Popular

An economics lesson from my barber
Inflation

An economics lesson from my barber

On reopening his shop after lockdown, Dominic Frisby’s barber doubled his prices. It’s all part of the post-Covid inflation process – and we’re going …
8 Jul 2020
Three ideas for Lloyds Bank's new boss
UK stockmarkets

Three ideas for Lloyds Bank's new boss

The Black Horse needs whipping into shape. A change at the top provides a great opportunity, says Matthew Lynn.
12 Jul 2020
Why the moving average is my favourite charting tool
Sponsored

Why the moving average is my favourite charting tool

Traders and technical analysts use "moving averages" to iron out daily fluctuations and give a much clearer picture of a market's direction. Dominic …
13 Jul 2020