Ernst & Young Eurozone Forecast
For some time we have been forecasting a “lost decade” of growth for the Eurozone. Many other forecasters have now come to the same conclusion and our expectations remain broadly the same. However, the risk of an imminent Eurozone breakup, which weighed heavily on business and consumer confidence for much of 2012, has been averted.
Learn more about the latest events by watching videos from our latest panel debate about the Eurozone.
Eurozone news releases
- March 2013: A fragile return to confidence in the eurozone
- December 2012: Eurozone painfully progressing to stability
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- 01/03/2013 10:35: Marie Diron, senior economic adviser to the Ernst & Young Eurozone Forecast comments on today's Eurozone unemployment data:
That the Eurozone unemployment rate continued to rise at the beginning of this year is not surprising. We expect further increases through most of this year as companies are still adjusting staff numbers to the weak, or indeed, falling demand environment. High and still rising unemployment rates are probably the single most important threat to the mid to long term economic stability of the Eurozone. As electorates fail to see the benefits of fiscal and economic reforms, we could see rising social tensions weakening governments and raising the possibility of a popular vote to exit the euro. In this context, it is essential to emphasise growth-enhancing reforms. We have already seen some benefits of the efforts to restore competitiveness in the peripheral countries in robust export growth, in particular to emerging markets. These results should be highlighted and leveraged with governments pursuing policies that encourage and reward innovation and entrepreneurship.
- 27/02/2013 12:54: Marie Diron, senior economic adviser to the Ernst & Young Eurozone Forecast comments on today's ECB loans data:
"Credit growth remains weak in the Eurozone as a whole with ongoing significant differences in credit availability between core and peripheral countries. We expect this situation to continue throughout most of this year as banks are gradually repairing their balance sheets and only slowly becoming more willing or able to lend to companies and households. Limited credit availability is one of the factors that we expect will impair growth in the Eurozone in 2013. Still in some countries and for some borrowers, credit is available at very low cost. As long as the more stable financial environment that we have seen since the beginning of the year can be preserved, this should enable companies to start investing and hiring again. For this to happen, further increases in volatility following the unclear result of the Italian elections need to be prevented. For Italy, this requires the formation of a credible government quickly whilst for the Eurozone as a whole, renewed strong commitments to keeping the monetary union together are needed. The ECB for instance could help a lot by re-asserting its willingness to intervene to help stabilise financial markets and to consider new measures."
- 22/02/2013 11:00: Tom Rogers, senior economic adviser to the Ernst & Young Eurozone Forecast comments on today's EC economic forecast:
Today's EC forecasts for the Eurozone economy are broadly in line with our own, with another year of falling output and rising unemployment in store in 2013. The Commission rightly identifies the dichotomy between recent recovery in financial markets and the lack of corresponding improvement in business and household confidence, or credit supply. We think this will improve gradually through the year, but it will be 2014 before growth returns in earnest, and not quite as robustly as in the EC's forecast.
We are encouraged by the strength of the Commission's messaging on the need for ongoing policy effort though. "Pressing ahead relentlessly" with fiscal consolidation and reforming labour and product markets is crucial to ensuring the progress made in restoring stability in recent months is sustained, and leads to a real recovery around the Eurozone. Reforms are already bearing fruit in a number of peripheral economies, and this should be an incentive for other Governments to follow suit.
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