The euro rose to a seven-week high against the dollar on Tuesday, due to optimism that the European Central Bank will take action in the form of making “mass purchases of Spanish and Italian debt.” Both Spain, where unemployment is around 25 percent, and Italy are in a recession.
A glance at some other data suggest that this optimism may be short-lived.
In a letter to investors, chocolatier Lindt & Sprungli said that even though pretax profits had risen 12 percent, “increasingly severe government debt levels” and “subdued economic performance” were affecting sales, as the Guardian notes. Indeed, Lindt used the word “deteriorate” to describe “consumer sentiment,” especially in southern Europe.
The chocolate company is predicting that “conditions seem likely to become still more challenging in the second half of the year.” Has it already lowered forecasts of chocolate purchases, all those Santas and foil-wrapped balls and coins (euros), during the December holidays?
Moody’s rating agency has declared that the task of “rebalancing the euro zone economy” is half-done. While saying that “adjustments, both in the periphery and the core, have already taken place — in some cases, to a significant degree,” Moody’s concludes that “the correction is at best only half-way complete, depending on the country in question, and could take several years.”
Risk from the ongoing debt crisis is cited as one reason the US could face a double-dip recession, the Standard & Poor’s ratings agency said on Tuesday. S & P now says that the chance that the US economy could fall into another recession is 25 percent, up from 20 percent in February.
The potential for an upcoming “fiscal cliff” and a slowdown in China’s economy were also noted as factors.
However, S & P did say that the U.S. economy would experience “modest growth,” with its gross domestic product increasing 2.1 percent.
So some of us might still be able to get one chocolate snowman, though maybe not a golden bunny too.
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