The European Commission has cut
sharply its growth forecast for the eurozone, warning that the "difficult
process of rebalancing will last for some time".
It now projects the bloc will narrowly avoid recession next year, growing by
0.1%, compared with its previous estimate of 1% growth, and thinks the EU
economy will shrink this year.
Unemployment would also continue to rise next year, the Commission said. The revision helped push global stock markets lower.
The Paris and Frankfurt exchanges closed down 2%, while London's FTSE 100
ended the day 1.6% lower. New York's Dow Jones lost 313 points, or 2.4%, at
12,933, its lowest level since early August.
The euro also weakened against the dollar following the revision, falling by
half a cent to $1.278. Against the pound, it fell by a fifth of a pence to
79.93p.
Figures released earlier on Wednesday showing the biggest monthly fall in
German manufacturing output since April, also weighed on markets.
As did concerns about the upcoming so-called fiscal cliff in the US, now that
the US election has been won by Barack Obama.
"Having been fixated on the US election and the preferred market outcome of
an Obama victory, the initial morning feel good bounce [has fizzled out], as
markets quickly moved on to the next potential banana skin," said Michael Hewson
at CMC Markets.
"In this case there are several, starting with today's Greek parliamentary
vote on austerity, not to mention concerns about how the newly elected president
will deal with the US fiscal cliff concerns."
Under current plans, $600bn (£375bn) of tax rises and spending cuts will kick
in in January, with many analysts saying this will push the US economy back into
recession.
2 comments:
If there's a constant barrage of right wing "EU is to blame for everything" bashing by idiot MPs whose mouth is inverse proportion to their brain and fuelled by media outlets run by people with axes to grind, then of course it can be used to feed into general anxieties caused by a bad economic downturn. Of course what these people will never tell you is that leaving the EU will worsen the situation - immediately by blighting our major export market (the BRICS countries they always say we can use as an alternative are even now turning down too, so that is an illusion); and long term because we shall still have to play by the rules applying to EU countries but will have no input into them. Finally it may well give a real boost to large companies that can throw out regulations protecting workers and grind down wages to third world levels while removing restrictions on hours and other working conditions. So once people really get to know the facts and how it will affect them, I suspect the polls will rapidly adjust the other way to reflect this
I am not surprised by this. I've spent all my adult life being pro-European, I studied European integration at university. In the past I would mock the likes of UKIP, convinced that they were narrow-minded English nationalists. I convinced myself that to be pro-EU was to be a progressive, after all the EU supported greater employment rights and the cohesion funds supported the poorer EU states. The EU was a powerful agent for democracy and freedom throughout the world. It seemed obvious that the EU was a 'good thing'. I've now come to the sad conclusion that the EU is none of these things. The elites in the EU want to create a country called Europe. They believe that these states where the people do not speak a common language, have no common culture and have massively divergent views on foreign policy, could in fact be one state. Complete nonsense. Everyone knows the arguments against the euro and there is near consensus in the UK that that is a disaster. But, to take the example of foreign policy, you only need to look at the Middle East to see the problems. A so-called country in which some governments are fanatically pro-Israel (Germany and France) and others want to recognise Palestine (Ireland, Spain, Portugal etc).
If there was a referendum tomorrow on EU membership, I would vote to leave it without a moment's hesitation. I have to admit that that nutter, Nigel Farage, was in fact right all along.
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