13 July 2010 16:53 [Source: ICIS news]
By Nigel Davis
EU economies continue to struggle with the burden of excessive debt as they seek a more sustainable exit from the financial and economic crisis.
And while Germany appears to push ahead, its exports growing strongly, the weaker EU economies mired in debt and forced to take emergency budgetary measures continue to colour sentiment and raise further talk of a double-dip recession.
But that sentiment appears to be shifting and the outlook, while subdued, is more encouraging.
EU officials on Tuesday stressed again that the European banking sector was resilient and that there were mechanisms in place to deal with vulnerability. The EU’s Council for Economic and Financial Affairs (Ecofin) said it would release coordinated Europe-wide results on 23 July of the stress tests Europe had imposed on its banks .
Measures introduced to reduce national deficits were sufficient to exceed targets in 2010 in 13 member states, European Commissioner for Economic and Monetary Affairs Olli Rehn, said. He warned, however, of the need to substantiate budgetary targets for 2011 and beyond.
Rehn said that
Just last week, European Central Bank (ECB) president Jean Claude Trichet suggested that the European debt crisis had subsided, given the stepwise measures that had been introduced to back the Greek recovery plan, tackle national budget deficits and establish a financial stabilisation fund for the pressured euro area with guarantees of €440bn.
“The ability of the Europeans to face up to a difficult situation seems to me to have been seriously underestimated initially,” he said in an interview conducted on 8 July, published in the French newspaper Liberation and on the ECB’s website.
And as the threat from the fiscal crisis subsides, so does the likelihood of it forcing a double-dip recession.
Business spending will underpin much of the growth in output, the bank said.
“Slowdowns and recessions tend disproportionately to be about corporate cutbacks,” its European economics analysts said in a daily note. “Yet there is no need for the corporate sector to cut back at present. It is in financial surplus - substantially so in the
Momentum is likely to carry most EU nations through current economic uncertainty, the bank suggested.
“The prospect of a renewed slowdown is being discussed as if it were not only possible - which it clearly is - but probable - which history says it isn't.
“On the contrary, the consistent pattern is that recoveries that start keep going. They don't start and then stop unless there is a new shock. That remains our presumption on this occasion and it continues to fit with the cyclical indicators.”
Growth may slow but there is a difference between perception and reality.
In chemicals, EU production output growth is expected to be moderate in the second half compared with the first.
In its most recent forecast for the sector, dated the start of June, trade group Cefic forecast a period of consolidation for the industry in the second half following stronger growth in the first six months of the year.
Chemicals output, excluding pharmaceuticals, was expected to grow by 9.5% year on year in 2010 but moderate to 2% in 2011.
($1 = €0.79)
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