EU BOMBSHELL: Economists claim the euro is 'spreading STAGNATION across bloc'

EU BOMBSHELL: Economists claim the euro is 'spreading STAGNATION across bloc'

In its latest quarterly forecasts, the European Commission warned eurozone growth will slow to 1.3 per cent in 2019 from 1.9 per cent in 2018.

Growth is expected to recover slightly to 1.6 per cent in 2020, but the new estimates are less optimistic than the Commission’s previous forecasts in November.

The Commission said all EU countries are poised to continue growing, with Brussels expected to post its seventh consecutive year of expansion.

However, the brakes will be significantly put on larger member states and Germany could be set for more financial pain, as the bloc’s largest economy is expected to slow to 1.5 per cent this year from 2.1 per cent in 2018.

It is a further blow for Germany, after the country’s biggest lender Deutsche Bank warned in a report last Wednesday the country is “drifting towards recession”, labelling the start of 2019 as a “major disappointment”.

France, Italy, Spain and the Netherlands are also expected to grow at a much slower rate.

Italy, which plunged into recession last week after its economy shrank further in the final three months of 2018, is expected to be the slowest growing economy in the EU, with expansion forecasts as low as 0.2 per cent this year.

The Commission blamed intensifying global trade tensions and a dramatic slowdown in China for the drag on the eurozone.

However, in 2018 book “Clean Brexit: Why Leaving the EU still makes sense”, authors and economists Liam Halligan and Gerard Lyons argue that the real problem with Europe is the single currency and they suggest it is likely that it will implode in the foreseeable future.

Mr Halligan and Mr Lyons wrote: “Europe’ isn’t working – a trend illustrated most starkly by monetary union.

“The single currency, which ‘most economists’ said the UK must join back in the late 1990s, is doing untold damage, spreading economic stagnation across much of southern Europe.

“Locked in a high-currency straitjacket, Greece and Spain are suffering from 40–50 per cent youth unemployment.

“Italy, having barely grown since the euro’s launch in 1999, could face a major banking crisis which, given the size of the Italian economy, has the potential to spark a global systemic meltdown.”

The authors noted that as they are “unable to depreciate their currencies”, less productive Eurozone members are being “sacrificed” on the altar of further European centralisation.

They added: “If the euro ever did implode, which looks entirely possible at some stage, the big EU economies would pick up the tab.

“For now, global reflation, which is boosting the world economy, has provided a temporary reprieve.”

Published at Wed, 13 Feb 2019 11:20:00 +0000