Wednesday, March 13 16:31:37
The euro zone might escape recession in the second quarter but only because of Germany's economic strength, according to a Reuters poll today that showed no prospect of even a moderate upturn soon.
The latest survey of more than 60 economists represented a slight downgrade to the growth outlook compared with a month ago, reflecting the latest economic data showing France, Italy and Spain in a sharp decline.
Although some confidence data on the euro zone have been cheerier since the start of the year, that hasn't been borne out in hard economic data.
Business surveys have shown the chasm between Germany and its weaker euro zone peers is at its widest since the currency union's birth in 1999, and suggest the consensus of economists is still on the optimistic side of the debate.
The latest poll suggested the euro zone economy will shrink 0.1 percent this quarter, making a contraction that would match the Great Recession of 2008-2009 in terms of length, if not depth.
Economists expect very slender growth next quarter and thereafter, but the risks to even this fairly feeble growth outlook are considerable.
"We think things will probably deteriorate again later on in the year, partly because of the fundamentally negative economic forces exerting themselves on the region," said Jonathan Loynes, chief European economist at Capital Economics, among the most accurate forecasters in Reuters polls in recent years.
He described these forces as continued fiscal austerity, generally weak global economic environment, low levels of consumer confidence.
"But also because we think the debt crisis is likely to re-escalate at some point during the year, and that itself will have some negative effects on the economy."
Although still the most pessimistic forecaster, Loynes pointed out the consensus, which shows a small contraction for the year as a whole, actually implies a fairly strong improvement from what's happened over the last few quarters.