Recession 'to return' to Europe, say economists

 
Greek protester Government austerity has undermined growth and caused a great deal of anger around Europe

The vast majority of leading economists surveyed by the BBC believe recession will return to Europe next year.

One fifth said the eurozone would not exist in its current 17-member form, while the majority put the possibility of a eurozone break-up at 30%-40%.

The survey also found that most economists expect UK interest rates to remain at 0.5% throughout next year.

It was conducted among 34 UK and European economists who are regularly surveyed by the UK Treasury.

Of the 27 who responded, 25 forecast recession for Europe next year.

Closer union

Growth in Europe has slowed in recent months as the eurozone debt crisis has forced governments to rein in spending and has undermined confidence in global financial markets.

The eurozone economy grew by 0.2% between July and September, while the 27 economies of the European Union grew collectively by 0.3%.

Politicians have attempted to resolve the crisis, including an agreement to forge closer ties between EU members, but markets have yet to be convinced the measures they have taken are sufficient.

The longer the debt crisis rumbles on, the more likely Europe will return to recession, economists believe.

'Deficit pain'

Growth in the UK during the third quarter was 0.6%. However, growth in the previous three months was flat.

The CBI business group said that 2012 could be the beginning of a more prosperous future if the "pain" of deficit reduction passed quickly.

In his New Year message, the CBI's John Cridland said the eurozone crisis posed a "significant threat" to the British economy, because 40% of UK exports were sold there.

Mr Cridland added that the faltering recovery and the continuing debt crisis were stark reminders of the need to rebalance Britain's economy away from household and government debt.

 

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  • rate this
    +7

    Comment number 460.

    Until people stop being deluded by the misuse of weather forecasting terms in economics and realise that the economy is under our control not something we react to, there will be no improvement. We need economists, financial institutions, businesses and governments to work pro-actively together to pull Europe out of recession. And need it NOW!!!

  • rate this
    +2

    Comment number 452.

    The messages seemed to have wandered of the point. The EU including the UK are in crisis. Peeling back debt both government and personal means less spend and therefore less money circulating. Quatum easing helps banks and nobody else. Unless printing money is given to the individuals to spend and kick start the economy nothing will change. Germany certainly can't do it on its own.

  • rate this
    +21

    Comment number 418.

    414: "An imbalance between rich and poor is the oldest and most fatal ailment of all republics."
    Plutarch - nearly two thousand years ago.

    Do we never learn?

  • rate this
    +11

    Comment number 373.

    Germany and to a lesser extent France, Austria, and Holland have all done very well out of the Euro. Lending cheap money to the PIGS so they can gorge themselves on German cars and French agro-products. The German coffers (at least) contain enough cash to bail out the PIGS entirely. This is the price they must pay to keep the Euro - or else; leave it and let the PIGS de-value.

  • rate this
    +27

    Comment number 343.

    Really, I'd never have guessed !. How many Phds and how much licence payer money was spent coming up with this utterly obvious conclusion. I run a business and have managed to maintain profitability in 2011 and have a plan to see us through 2012 (which includes new jobs). Why doesn't the BBC research team spend some time finding positives rather than mindlessly repeating this gloomy message.

 

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