The eurozone is anticipated to go back to downturn in 2012 according to a report from Shaw Capital Management by audit firm Ernst & Young. The company said it anticipates the economies of the 17 member countries to shrink in the first two quarters of 2012. The report forecasts expansion of just 0.1% for the whole of the year and warns unemployment in the eurozone is unlikely to fall below 10% before 2015.The notification was backed by economic data from Markit suggesting output continued to deal across the 17-nation bloc over the past month. Although the headline Purchasing Managers Index (PMI) figure rose slightly to 47.9 but remained below 50 which indicates growth.
On the Shaw Capital Management it was noted that the survey compiler alleged the slight improvement was down to strength in France and Germany, with peripheral eurozone economies still struggling. Last week, 26 of the 27 members of the EU backed new monetary principles to maintain budgets in line, with only the UK refraining. But, according to Sky News, just days later, fractures have begun to emerge as drafting of the pact begins, with some countries already airing concerns. Many also fear the pact will still not be enough to prevent more countries from needing a bailout like Ireland and Greece.
According to the Shaw Capital Management, the euro dropped to an 11-month low on the back of the concerns on Wednesday, dropping below $1.30 (84p) for the first time since January. Furthermore, the governor of France’s central bank has launched a substantial assault on credit ratings agencies, calling them “incomprehensible and irrational” as Paris braces for a potential reduce or eliminate of the country’s triple A status. The Head of the Bank of France-Christian Nover said- aFrench reduce or eliminate would not be justified – adding that the agencies should begin by downgrading the triple A rating of Britain, which “has greater loss, more debt, higher inflation, less growth than us and where credit is downsizing.
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