S&P says Europe facing 'subtrend growth' until 2011
THE European economy will see "subtrend growth" this year and through the first half of 2011 as consumer spending languishes and banks continue to curtail lending, analysts at ratings agency Standard & Poor's said yesterday.
"Our growth outlook over the next 12 to 18 months remains somewhat pessimistic," said Jean-Michel Six, S&P's chief European economist in Paris.
"Those expecting Europe's rapid return to trend growth will have to be patient.
"Over the past 18 months, fiscal and monetary stimuli have put a floor under European economies, preventing a fully fledged depression.
"As the repercussions of these policies start to recede, we could find ourselves watching a relay race that is missing runners.
"There may be no one out there, except for the emerging markets, who are ready to grab the baton."
The German economy probably stagnated in the last three months of 2009, the country's Federal Statistics Office said on January 13, capping the worst year since World War Two.
The European Union forecasts that the euro-area economy, which shrank 4pc last year, will expand by 0.7pc this year and 1.5pc in 2011.
That compares with average annual growth of 2.1pc in the decade after the euro began trading in 1999.
Recent economic data from Germany indicates that Europe's largest economy stagnated in the fourth quarter after growing 0.7pc in the preceding three months, said Mr Six.
"The data underscores the fragility of Germany and Europe's fledgling recovery," he explained.
"One of the main reasons for this is consumer demand, which we think is likely to stagnate in the euro zone in 2010.
"Secondly, tight lending conditions for households and companies, in our view, are likely to spill over into 2010." (Bloomberg)