Eurozone

Welcome to the Ernst & Young Eurozone Forecast & Outlook for financial services.

Key highlights: Winter 2012

Since our autumn forecast in September there has been significant progress towards a more secure Eurozone. The European Central Bank’s policy has greatly diminished the imminent risk of a breakup. Meanwhile, progress has been made towards a banking union and the policy mix is shifting from a sole focus on austerity towards measures designed to foster growth. The risk of a Greek exit has receded. So overall, at the end of 2012, the near-term future of the Eurozone seems safer than when the year started.

• The economic outlook is broadly unchanged from September. We still expect a contraction of 0.5% in 2012 as a whole. The economy will stagnate in 2013 before growing by just 1.3% in 2014-2016.
• The economic environment will make the unemployment rise throughout 2013, peaking at close to 20 million.
• Businesses now need to plan for a European “lost decade”. This will be a tough operating environment for both business and political leaders.
• Eurozone outlook for financial services: proposed banking union is a step in the right direction. But policy uncertainty still clouds the outlook for financial services organizations. How will this impact the Eurozone’s banks, asset managers and insurers? Read more here.

There has also been a welcoming revival of the Growth Pact at the September EU Council meeting. The Pact contains supply-side reforms that could yield large longer-term benefits. The pact is also a welcome broadening of policy beyond austerity. However, the biggest short-term boost to growth would come from removing uncertainty about the survival of the Euro. This would have the potential to unlock investment and recruitment plans that are currently on hold.

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