Britain’s Chancellor George Osborne recently warned that the Eurozone could slip back into crisis and that the UK would “not be immune” from the effects.
The chancellor spoke out about his concerns of recovery before a meeting of the International Monetary Fund last week, which warned about the health of Eurozone banks. The IMF believes there is close to a 40% chance that the single currency bloc will slump back into a triple dip recession before the end of next year.
This comes after a spate of data released last week showed a number of Eurozone countries such as France, Italy and Spain experienced no inflation in September, reflecting the lack of consumer and business confidence in these countries. This only exacerbates the national governments’ struggle to reduce their outstanding debt. Even Germany, which is usually seen as the powerhouse of the European economy, is faring badly. Its once thriving export industries have been badly dented by weak demand elsewhere in Europe, hindered further by slowing growth in the rest of the world economy.
Osborne said a slowdown in Europe was already having an impact on UK exports. He stated more measures were needed to get through this potential financial turbulence, as Europe has once again become the talking point of the UK economy, posing as the biggest threat to future recovery and growth.
Osborne’s speech came on the same day as the British Chambers of Commerce (BCC) highlighted that the UK’s weakest rate of export growth in two years is the “first alarm bell’ for the country’s economic recovery. The Office for Budget Responsibility, is forecasting growth of around 0.6% per quarter compared with the 0.9% seen in recent months.
The warning from Osborne, combined with the International Monetary Fund’s (IMF) downbeat outlook for the global economy and bad news from Germany, meant stock markets took a large hit. Billions were wiped off stock values as investors absorbed the news — the economy’s recovery is again in danger after so many long hard-fought years of recovery.
A string of influential economists have also voiced their concerns on the crisis in the Europe. Nobel laureate Michael Spence said stagnation (a period of rising inflation and falling output) for five years “is the best the Eurozone can hope for”
“It’s like being under siege”, said one senior European policymaker. “Europeans are being made to feel it’s all their fault. We are the bad guys in the world economy, with Germany seen as Public Enemy Number One.”
Compounding the existing problems in Europe, the world economy is being hit by a series of external shocks, from political turmoil in the Middle East, Russia’s new imperialism and now the possibility of an Ebola pandemic. To make matters worse, emerging markets are now entering an era of slower growth with China slowing fast as it attempts to curb a credit boom and stagnant economies being experienced in both Brazil and Russia.
BY ELEANOR WEBSTER U6TH