Euro May Weaken Further – A Gloomy Year End in Sight

October 29 00:00 2011

New York, October 29 ( – Economic data emerging just a day after European leaders took on the task of tackling the debt crisis, shows that the euro region’s weakening economic outlook could lead to stalling of the economy or even shrinking it by the end of the year. Such a situation would make it more difficult to employ more bailouts and fiscal cuts to stabilize the crisis.

According to the Eurocoin indicator issued by the Center for Economic Policy Research and the Bank of Italy, economic activity in the euro zone shrank for the first time since the 2009 recession.
It is now fairly certain that economists will widely predict that the euro zone’s gross domestic product for the third quarter will be even slower than the meager 0.2% quarterly growth reported in the previous period.

Although European leaders came to a basic agreement Thursday for costly solutions of a spreading debt crisis, there was no indication of any growth policy. On the other hand, fiscal austerity steps are being escalated in countries like Greece, Italy, Spain, Portugal and even France.

It is also reported that the euro might weaken next week ahead of a European Central Bank meeting that might lift pressure in view of the deteriorating economic outlook of the region. Jens Nordvig, global head of G10 currency strategy at Nomura Securities in New York said, “The level of the PMI (purchasing managers’ indexes) suggests Europe is in recession already. And it’s just a matter of time as to when the ECB is going to reduce rates to at least 1 percent.”