Standard & Poor's slashes eurozone growth forecast

Doom and gloom update: the credit ratings agency S&P reckons the eurozone will not start to grow again until at least 2014, possibly even later. Put the balloons away.

by Michael Northcott
Last Updated: 19 Aug 2013

Today brings more bad news from across the Channel – Standard & Poor’s says it now expects an 0.8% contraction in the eurozone this year, and no growth at all for 2013. That’s down from projections of -0.7% and 0.3% respectively, and not really what anyone wanted to hear. Get more specific, and the numbers are worse: Spain was expected to endure a 0.6% contraction in 2013, now S&P expects 1.4%. Looks like we’ve got to go a little further down the pan before anything can get better…

S&P’s chief economist for Europe said: ‘The data are confirming our view that the region is entering a new period of recession, after three quarters of negative or flat growth since the final quarter of 2010.’ Enough to put anyone in a bad mood. The situation is not helped by Greece’s ongoing woes – yesterday it emerged that the country has a further €20bn black hole in its public finances that no one previously knew about. Apparently European debt inspectors from the European Central Bank, the European Commission and the International Monetary Fund discovered the lack of funds just yesterday.

And if you needed an even higher dose of economic anxiety, German business confidence has also fallen to a two-year low, according to new data. The Ifo Institute’s business climate index, which questions bosses at 7,000 Germany companies, found that confidence has fallen for the fifth consecutive month. Since everyone in Europe has been relying on the vague notion that Germany could just unleash the economic bazooka if things got really bad, this survey is a scary revelation.

Still, there are some ideas floating around like the ECB’s bond-buying programme, which would mean artificially suppressing bond yields for countries like Spain, so that they can continue to borrow money relatively cheaply. But whether or not any of this will work is anyone’s guess. The sense that no one knows what to do grows stronger by the day…

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