Business

Recession 'to return' to Europe, say economists

  • 30 December 2011
  • From the section Business
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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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