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Euro Zone Crisis Pulls Down Global Economic Growth Forecast

Euro Zone Crisis Pulls Down Global Economic Growth Forecast

 

Monday was not the happiest of days for the euro zone, with the International Monetary Fund cutting its forecast of growth in 2013. It is a sign that the measures so far taken by European institutions and leaders are not enough to spur growth and assuage markets.

While growth for 2012 remains at 3.5 percent, the IMF’s estimate for 2013 growth is now 3.9 percent, down from an estimate of 4.1 percent in April. By way of comparison, in 2010, the world economy grew 5.3 percent.

Moreover, these modest forecasts may be further lessened due to “downside risks” if more aggressive measures are not taken.

The effects of the euro zone crisis are registering far beyond Europe’s borders. As the New York Times details, the countries seeing the largest reductions in expected growth due to a global economic showdown are Brazil, India, the UK and Korea and Singapore.

The IMF also took the US, whose economy is the world’s largest, to task. Clearly remembering the protracted negotiations to raise the debt ceiling last summer, the IMF also called on American legislators to avoid the “fiscal cliff” and raise the debt ceiling “promptly.”

But European countries received the harshest censure. The measures suggested were not new — a stronger banking union, increased monetary easing, better plans for making cuts to budgets — but the question remains if European countries can make these and in time to fend off a deepening of the crisis.

The news that a German constitutional court will not announce its ruling on whether the European bailout fund is legal until September 12 was a disappointment. Clearly being told two months down the line that the European Stability Mechanism (ESM) does not accord with German law would be problematic.

A look at Spain would shake confidence in such. Hundreds of civil servants took to Madrid’s streets to protest the €65 billion austerity plan announced by prime minister Mariano Rajoy last week. From the Kuwait Times:

Thousands of Spanish “indignant” protesters rallied against austerity cuts Friday night before some of them clashed with police, who charged demonstrators with batons. Surrounded by 20 police vans, they stood outside the headquarters of the Popular Party (PP) of Prime Minister Mariano Rajoy and shouted “resign, resign!” and “they are lining their pockets!” Carrying signs that read “They call it democracy, and it isn’t”, they then headed for the headquarters of the opposition Socialist Party, which they also accuse of incompetence in the face of the crisis.

Workers blocked streets and railways in Madrid, protesting against cuts which they said hurt ordinary people more than the bankers and politicians blamed for the country’s economic crisis.

Unions in Spain have called for a strike in September. As Deputy Prime Minister Soraya Saenz de Santamaria said: “Spaniards are living today one of the most difficult and traumatic moments of our history.”

 

Previous Care2 Coverage

Euro Zone Crisis: China’s GDP, Bank Fraud and Muscadet

Euro Zone Crisis: The Body Part Black Market

Euro Zone Crisis: What More Austerity Means

 

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12 comments

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9:59AM PDT on Jul 19, 2012

Replace Euro Zone with "the wealthy". Replace "IMF" with "The Mafia".

Nothing against the article. It is pertinent and describes problems that exist but it describes them in context within the system as if the system we operate under is valid. Yes there is a Euro Zone crisis. Yes measures being taken are not working out so well. Yes growth that was insane is now coming down.

But what is doesn't talk about is where the crisis came from. Why it was purposefully generated (designed and gambled to cause an affect not exactly gauged but relatively). And how we the people are expected and coerced to pay for the problem and surrender more and more to the wealthy.
Capitalism is failure. It is unsustainable. Even in it's most ideal form it cannot hold perpetually. In it's current form it's toxic. The wealthy are using our current system to enrich themselves and force austerity on the other 99%. What is happening now will only get worse. When the forecasted crisis happened in 2008 we were told it was temporary. We would soon recover. But the simple fact is the crisis wasn't one of capitalisms market adjustments. It's the result of decades of deregulation and money influence on our governments. Why else would they lower the prime interest rate so low for so long. They knew this was coming. They planned this all along. And the worst is yet to come. The class war has escalated and will continue to get worse.
We're the frogs sitting in the pot of water on the heater as the temp

1:06PM PDT on Jul 18, 2012

@ arild.w - and who on earth told you this B.S.?
Actually it is the crisis of the American finances that triggers everything and makes things difficult. The euro only follows.
Proven: it all started with the American addiction to spend more than they have. A lot more. Of course, the Euro-currency was a mistake from the beginning as there are countries with a weak and others with a strong economy. It was like that long before the Euro. But what really made things go bad was the dollar crisis, which keeps going on and on and on. So why the hell do you blame things on the Europeans instead of cleaning up in your own country - and in your heads?
Europe may seem incomprehensible to Americans in its variety and complexity - but none of our countries here would even dream of voting for something as utterly stupid and blockheaded as your so-called republicans.

6:33AM PDT on Jul 18, 2012

We are right behind them if we don't rein in our spending drastically. We need to get these tax and spend liberals out of office and get some people with some restraint. We also need to cut out some of the aid we send to these countries who hate us and pretend to be our friends just because we send them so much of our hard earned tax money.

5:30AM PDT on Jul 18, 2012

Thank you for the article...

4:21AM PDT on Jul 17, 2012

:-)

4:21AM PDT on Jul 17, 2012

:-)

3:57AM PDT on Jul 17, 2012

thanks

3:09AM PDT on Jul 17, 2012

thanks

2:23AM PDT on Jul 17, 2012

Just get on with living.... Look up the story of the "Hot Dog seller". These experts want to baffle us and they still get paid even their "predictions" are wrong. There is a competion here (Australia) in a national newspaper where 7 people predict the outcome of a week's trading in shares. The Mystic and the dartboard are ahead of the Industry experts. Now what's that telling us. Just go for it - we really don't need these people

1:58AM PDT on Jul 17, 2012

Well Germany is making money off this crisis...........

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