Eurozone in danger of recession - report
The eurozone is perilously close to entering recession this year, and Germany may even be in a technical recession already, a report said today.
The forecast from the Centre for Economics and Business Research (CEBR) estimates the eurozone’s economic growth will stall during the second half of 2001.
CEBR warned it could even come close to delivering two consecutive quarters of negative growth - the technical definition of a recession.
Germany, Europe’s largest economy, is likely to have shown negative growth in the second quarter of 2001, while growth for the third quarter is predicted to be close to zero and possibly negative - suggesting it may even be in technical recession at present.
The forecast comes on the day the European Central Bank is set to announce its interest rate decision, and analysts are predicting the cost of borrowing will stay on hold at 4.5%.
Douglas McWilliams, CEBR chief executive and author of the report, said: ‘‘The Bank can’t move either way at present.
‘‘Eurozone inflation has fallen from its 3.4% peak, but with the phasing out of national currencies likely to lead to price rises, inflation is likely to stay above the Bank’s target of 2% until 2003. So it is difficult to cut rates.
‘‘But at the same time, with growth stalling and European unemployment starting to rise, there will be substantial pressure on the Bank to take some action to boost demand.’’
He said the UK was unlikely to fall into a technical recession as our economy is more responsive to interest rate fluctuations.
