There is a fresh bout of fear over the economies which form the eurozone area following the announcement of growth statistics by the International Monetary Fund.
At its annual meeting in Washington the talk was of concern that the area still had not recovered from previous recessions and may indeed slide into a new downturn.
Although previous economic instability saw protests in cities such as Athens and Madrid, the latest figures are expected to hit the markets as the gloomy forecast saw stock markets across the globe slip.
The downcast statistics are based on severe long term economic problems particularly in Europe, where weak growth and an ageing population combine with stringent regulatory frameworks and considerable hurdles for businesses meaning innovation faces more barriers than in other parts of the world.
The IMF spent considerable time at the meeting urging European countries to spend on infrastructure as a way of stimulating economic growth, demonstrating that the organisation which has generally been lead by a European still leans towards Keynesian economics.
The French are looking towards a policy of ‘borrow and spend’ and the Italians are also looking to stimulate growth through government spending but are bound by the EU fiscal rules laid down by Brussels and Frankfurt during the last crisis. Germany’s central bank is also set to cut official growth forecasts this week.
According to The Telegraph, the UK Chancellor George Osborne said that “serious clouds were gathering on the horizon.
“The biggest risk to the global economy at the moment and certainly the biggest risk to the UK is the risk of the Eurozone falling back into recession and into crisis” he told reporters in Washington.”
According to the figures released by the IMF, the UK economic would be the fastest growing economy this year, at 3.2 per cent. But while this is positive news for Mr Osborne he will be concerned that the IMF has downgraded its estimates of global growth to 3.3 per cent impacting on the income from exported goods which the UK needs to balance its books.
And the news is worse for the 18 countries which use the euro as growth is down 0.3 per cent to 0.8 per cent from July’s predictions, figures which were already low compared to the global competition.
But many people are not surprised that the eurozone in particular is suffering, not only because of the ageing population but also the concerns over productivity.
With the EU operating what it calls a ‘globalisation adjustment fund’ which provides hand outs for countries and companies which ‘haven’t dealt well with the increased competition from globalisation’ and left leaning politics governing most national governments there is little incentive or drive for market liberalisation and supply side reforms which were responsible for the huge growth in the economies in both the UK and the US and which many observers say is desperately needed.
Director General of the Institute of Economic Affairs Mark Littlewood told Breitbart London:
“The Eurozone runs the risk of slipping back into crisis without significant supply-side reform.
“Growth in the region has been stunted by low interest rates and mounting pressure on banks to have stronger balance sheets. Combined with crippling debt, the Eurozone faces serious challenges in the months ahead unless significant market reforms are implemented.
“Reduced government spending has put the UK on the right track, something which several Eurozone countries could learn from. There is still much that could be done. A reduction in heavy handed regulation would help to alleviate the region’s economic woes and move the Eurozone economies away from the danger zone.”
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