The Global Economy - November 30, 2011
The debt crisis in the euro zone – from periphery to core
- The inability to resolve the euro zone’s debt problems could create a recession in the region and complicate the global recovery. The crisis is spreading from southern Europe to the euro zone’s core countries. The situation is growing more serious, and even though there is a commitment to save the currency union, there is a lack of agreement which tools to use.
- Until the third quarter the global economy was strengthening at a reasonable pace. Leading indicators, purchasing managers indexes and confidence data are now signalling that growth will slow, especially in the euro zone and the UK. An inability to resolve the budget problems in the US and the crisis in the euro zone could drag the US economy into a new recession. If tax cuts are extended, this risk is reduced. Emerging economies are expected to slow, but not at all to the same extent as the euro zone, where fiscal austerity, credit austerity and lower future confidence among businesses and households are hurting the growth outlook.