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Europe to experience economic contraction in 2012 and 2013 

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A new report issued by the European Central Bank forecasts a downward trend in growth and similar inflation.

By LUIS MIRANDA | THE REAL AGENDA | AUGUST 9, 2012

The “let’s do the same thing and expect better results” crowd is getting what they wanted in the Euro zone. The latest analysis issued by consultants hired by the ECB explains that the European economy is bound to contract n 2012 and continue on that trend in 2013. No surprises here, unless you are one who believes in banker controlled economies as supposed to market driven ones.

The results of the corporate elite’s policies that were supposed to help bankrupt nations to stay afloat, while they think of new non-solutions, crashed to the ground in Greece but that did not stop the bankers from applying the same so-called solutions in Spain, which is a more significant member of the European economy. So the story repeated itself there as well.

The experts consulted by the ECB have revised their forecasts for growth in the euro area this year and forecast a contraction of 0.3% versus the 0.2% forecast in May, which speaks against all measures adopted so far by Brussels and its accomplices in the banking power structure. The non-solution at hand that is being proposed is to once again cut in interest rates.

In the survey, the European Central Bank (ECB) held between 16 and 19 July and published today in the August monthly bulletin, experts conclude that growth will continue its downward trend for this year and next. With this review, the regulator says that the euro zone has room to lower interest rates in September.

“The results also imply that inflation expectations for 2012 and 2013 have experienced virtually no change compared with the previous survey,” the ECB said.

As for the inflation forecast in the longer term, the average remains unchanged at 2%. That is under current conditions, which are not likely to stand, as the euro region digs itself into a deeper hole by continuing their policies of further indebtedness, which will only prolong and worsen the crisis. Consequently, inflation will certainly not stay at 2%.

The ECB president Mario Draghi said last week that “the governing board of the entity discussed a possible lowering of interest rates, but decided that it is not the right time.” Some experts expect the ECB to reduce the price of money, currently at 0.75% at its September meeting. As in other occasions, the European Central Bank will wait until the last minute to act, and its actions will not be the real solutions needed to bring the euro economy back. As we have now heard the main stream media confess it, that is the goal of the banking elites: to delay the collapse as much as possible while inflicting pain to the nations that are in financial trouble, because this will assure the maximum consolidation of power and resources.

Expectations of growth of gross domestic product (GDP) by 2012 have been revised slightly downwards by 0.1 percentage points and currently stand at -0.3%. For 2013, forecasts of growth in the euro area have declined significantly, by 0.4 percentage points to 0.6%. Under current conditions, once can expect, that even with cooked numbers, Europe will have no growth at all after 2013, especially if more nations such as Italy and France need to be rescued as well.

“The main determinants of the downward revisions are stepping up fiscal consolidation measures in some countries in the euro area and the greater uncertainty surrounding the resolution of sovereign debt crises,” the report said. Also, “maintaining the downside risks to growth in GDP in the euro area, resulting primarily from an escalation of the sovereign debt crisis.” And what is the ECB or the IMF doing to solve the sovereign debt crisis? Nothing. That is the big pink elephant in the room, but the bankers are simply staring at it without proposing a single solution. This inaction stems from the same reason explained above. A slow, prolonged collapse will assure better results for the bankers.

“These risks are also mentioned a further deterioration in confidence, increased levels of uncertainty and a fall in external demand as a result of a slowing global economy,” according to the ECB. The inflation forecasts for 2012 and 2013 obtained from the survey are located at 2.3% and 1.7% respectively, implying that not been revised figures for 2012 and have been revised 0.1 percentage point decline in the 2013.

This downward revision for 2013 was primarily “to lower prices for energy and raw materials, the less favorable growth prospects and the fact that wage pressures have been more limited,” according to the ECB. He added that inflation expectations for 2014 are at 1.9%. Risks to the outlook for price developments remain generally balanced over the medium term.

Upside risks come from further increases in indirect taxes, resulting from the need for fiscal consolidation, and some increases in energy prices over the medium term plan. The main downside risks are related to the impact of lower growth than expected in the euro area, especially due to the escalation of tensions in financial markets that could affect the balance of risks to the downside.

About the author:

Luis Miranda is the Founder and Editor-in-Chief at The Real Agenda. His career spans over 17 years and almost every form of news media. He attended Montclair State University's School of Broadcasting and also obtained a Bachelor's Degree in Journalism from Universidad Latina de Costa Rica. Luis speaks English, Spanish Portuguese and Italian.

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