Eurozone ‘heading for recession in 2012’

The audit firm said it expects the economies of the 17-member countries to shrink in the first two quarters of 2012.
The report predicts growth of just 0,1 percent for the whole of the year and warns unemployment in the eurozone is unlikely to fall below 10 percent before 2015.
The warning was backed up by economic data from Markit suggesting output continued to contract across the 17-nation bloc over the past month.

Although the headline Purchasing Managers Index (PMI) figure rose slightly, at 47,9 it remained below 50 which separates economic growth from a slowdown.
The survey compiler said the slight improvement was down to strength in France and Germany, with peripheral eurozone economies still struggling.
Last week, 26 of the 27 members of the EU backed new fiscal rules to keep budgets in line, with only the UK abstaining.

But just days later, cracks have begun to emerge as drafting of the pact begins, with some countries already airing concerns.
Many also fear the pact will still not be enough to prevent more countries from needing a bailout like Ireland and Greece.
The euro fell to an 11-month low on the back of the concerns yesterday, dropping below $1,30 (84p) for the first time since January, while gold — usually seen as a safe haven for investors — lost 3,5 percent, before stabilising.

Asian markets also reflected weak sentiment with Tokyo’s Nikkei down 1,7 percent and Hong Kong’s Hang Seng index 1,8 percent lower overnight.
However in Europe, markets fared better on today’s open, with Britain’s FTSE 100, Germany’s DAX and France’s CAC all edging up by nearly 1 percent.
“The reforms agreed at the summit on 9 December were a step in the right direction and the response seems to have been mildly positive,” Ernst & Young said.

It added: “Investors remain very concerned about the commitment and ability of eurozone governments to implement reforms quickly.”
Nonetheless, leading economist and chairman of Goldman Sachs Asset Management has expressed his confidence in the single currency.

Jim O’Neill told Sky’s Jeff Randall Live that European leaders wouldn’t give up easily, despite the continuing crisis in the eurozone.
Meanwhile, the head of Britain’s armed forces, General Sir David Richards, has said the eurozone crisis is of “huge importance” to defence chiefs as well as the City of London.

In a lecture to the Royal United Services Institute in London he said: “I am clear that the single biggest strategic risk facing the UK today is economic rather than military.
“Over time a thriving economy must be the central ingredient in any UK grand strategy. This is why the eurozone crisis is of such huge importance not just to the City of London but rightly to the whole country, and to military planners like me.”

He added: “The country’s main effort must be the economy. No country can defend itself if bankrupt.” — Xinhua.