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17 January 2013

Bloomberg: Euro area seen stalling as Draghi's pessimism shared


According to a survey of economists, the euro area economy won't return to growth until the next quarter, as a recovery in Italy is delayed and France continues to shrink.

In addition to austerity measures, the euro economy’s performance may be further threatened by the strength of the common currency. It has climbed against 30 of its 31 most-traded peers since Draghi said in July that he would do “whatever it takes” to save the currency.

In Italy, Parliamentary elections scheduled for February 24-25 have provided a staging ground for former premier Silvio Berlusconi to blame incumbent Mario Monti for the nation’s recession. Berlusconi, fighting criminal charges that he paid a minor for sex, is gaining support.

Chancellor Angela Merkel’s government cut its 2013 projection yesterday to 0.4 per cent from 1 per cent previously. The downgrade followed a Federal Statistics Office report showing economic growth slowed last year to less than a quarter of its 3 per cent pace in 2011. France is expected to contract 0.1 per cent this quarter, a forecast unchanged from last month, after shrinking an estimated 0.3 per cent last quarter, according to the Bloomberg survey. That means the euro area’s second-largest economy will slip into recession for the first time since 2009 as President François Hollande strives to reduce the nation’s deficit in the face of soaring jobless claims.

The mixed picture across the euro area has kept the ECB’s policy on hold since September when it announced a programme which would allow for the purchase of government bonds in some circumstances.

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© Bloomberg


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