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Euro zone's slender recovery is here to stay, say economists - Reuters poll
September 11, 2013 / 3:11 PM / 4 years ago

Euro zone's slender recovery is here to stay, say economists - Reuters poll

LONDON (Reuters) - The euro zone’s tentative economic recovery is here to stay, say economists polled by Reuters who were almost unanimous that it will not relapse into recession next year.

An European Union flag flutters outside of the European Parliament in Brussels October 12, 2012. REUTERS/Francois Lenoir

Even so, this week’s survey of 50 analysts showed the euro zone economy will struggle to gain any momentum after emerging from its lengthy recession in the second quarter, ekeing out growth of 0.3 percent.

From here on, the poll suggested euro zone gross domestic product will rise only around 0.2 to 0.4 percent in each quarter into early 2015.

Europe’s biggest economy, Germany, has led the currency union’s nascent recovery so far, although other big euro zone countries like Italy and Spain are still languishing in recession. And France, the No. 2 economy, cut its 2014 growth forecast on Wednesday.

Still, most economists - 21 out of 33 - said they were confident the euro zone’s recovery is durable. The remaining 12 said they were not.

“I‘m very confident that it will last, but not confident regarding an acceleration of economic activity,” said Jean-Louis Mourier, economist at Aurel BGC.

Only one economist forecast a return to recession from now until the end of next year.

That newfound sense of confidence was reflected in forecasts for the euro zone, Britain and the United States too.

Fifty-four out of 66 economists across these polls said they were confident developed economies can carry world economic growth through the Federal Reserve’s expected reduction of its monetary stimulus and slowdown in emerging markets.

The remainder were not confident.

European Central Bank policymaker Joerg Asmussen said on Tuesday the impact of the U.S. central bank unwinding its policy stimulus risks being greater now than in 1994, when it started a tightening cycle and bond markets crashed.

A Reuters poll on Monday showed the Fed will announce next week it will trim its spending on monthly asset purchases by $10 billion, a smaller amount than previously expected. <FED/R>

Although the euro zone economy is improving, the spectre of political unrest still haunts its progress.

At the moment, Italy, the world’s fourth-largest debtor, is the biggest worry. Its borrowing costs rose on Wednesday, pushed up by fears the governing coalition will not survive if former prime minister Silvio Berlusconi is expelled from the Senate following a tax fraud conviction.

The poll also showed economists were largely in-tune with the European Central Bank’s plan to keep interest rates low “for an extended period”, with the consensus showing the main refinancing and deposit rates on hold at record low levels until at least early 2015.

ECB President Mario Draghi said on Thursday it was ready to cut interest rates or pump more money into the euro zone if it needed to bring money market rates down and help the euro zone’s “very, very green recovery”.

Polling by Swati Chaturvedi and Diptarka Roy; Editing by Toby Chopra

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