Recession in the Eurozone could be avoided

Eurozone entered its second recession in four years - its GDP is decreasing for the second consecutive quarter, having declined in July-September 2012 to 0.1%, while in the previous quarter the downfall made 0.2%. Economic growth across the EU did not exceed 0.1%.

 

The recession in the Eurozone was quite expected, since the aggregate GDP was reached due to the input of two economies - Germany and France. This situation could not last forever.

The recession was predictable also because the monetary quantitative mitigation measures were imposed too late. It will take time for the monetary measures to make an effect and start to decrease the burden on the budgets and the banking system in terms of "bad" debts. I believe that Q4 2012 will be better, and in QI 2013 one can expect some positive changes, although economy of Greece will continue to experience serious challenges. I don’t think the collapse in the Eurozone is inevitable. According to the most likely scenario, the revival of economic activity will take place at the background of growing inflation.

If monetary measures were taken six months earlier, the current recession could be avoided, because objectively recovery is observed in the U.S., as well as in China. By the way, I believe that the change of leadership in China will provide an additional incentive, and the situation in the global financial markets will improve.

Speaking the Eurozone impact on the global GDP, this indicator is dependent to a greater extent on the USA, China and Japan. In the short term prospective, according to OECD forecast, the growth rates of global GDP will be somewhat decreased, but in the next decade the expected growth should exceed 3%.

A.L. Vedev, Director of the Center for Structural Research      

Friday, 16.11.2012