The Corner


Euro-zone recovery postponed yet again.

The FT reports:

The economic slowdown that has shaken the eurozone’s periphery will continue to bleed into the currency bloc’s core this year, with France and Germany barely growing, according to highly anticipated forecasts published on Friday by the European Commission.  The worsening economic picture – where France’s gross domestic product is expected to grow by just 0.1 per cent and Germany’s by 0.5 per cent in 2013, both 30 basis point downgrades from three months ago – will see the eurozone as a whole shrink 0.3 per cent this year. The Commission had predicted growth of 0.1 per cent in November.

“The weakness of economic activity towards the end of 2012 implies a low starting point for the current year,” Olli Rehn, the EU’s economic affairs commissioner, said in a statement. “The current situation can be summarised like this: we have disappointing hard data from the end of last year, some more encouraging soft data in the recent past and growing investor confidence in the future.”

Ah, “ growing investor confidence.” As usual, the EU is quite happy to refer to cheer on those wicked speculators when they deliver the “right” message.

The good cheer continues:

After shrinking 7.1 per cent in 2011 and 6.4 per cent last year, Greece is expected to see its sixth year of economic contraction in 2013, suffering a 4.4 per cent cut in economic activity – another downward adjustment from the 4.2 per cent predicted in November. Greek unemployment is expected to hit 27 per cent this year, up from 24.7 per cent in 2012, while Spain’s jobless rate will grow to 26.9 per cent. Portugal, where broad-based political support for the austerity measures accompanying its €78bn bailout has begun to fracture, will see unemployment peak at 17.3 per cent this year, according to the forecasts. The bleak picture threatens to upend eurozone efforts to bring down debt levels across the region. Eurozone government debt is expected to hit 95.1 per cent of GDP this year, the highest levels since the creation of the single currency….

[The] new data reveal just how difficult the road ahead is for Madrid to hit even the new, more lenient targets. Spain was supposed to lower its deficit to 5.3 per cent of GDP last year, but instead came in with nearly double that: 10.2 per cent, by far the highest in the EU.  This year, Spain’s deficit is projected to hit 6.7 per cent, well off the 3 per cent goal it was supposed to achieve. Without any additional austerity measures, Madrid’s deficit it projected to balloon again to 7.2 per cent in 2014, the forecast predicts.

And so it goes on. Trudge trudge trudge.

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