Eurozone concerns persist

The Organisation for Economic Cooperation and Development (OECD) has painted a troubled picture of the Eurozone economy. The forecast of a 0.6% contraction in GDP is down markedly from the 0.1% contraction forecast just six months ago.

It said Eurozone unemployment would continue to rise from its current rate of 12%, stabilising in 2014.

It blamed continuing austerity measures, weak confidence and tight credit conditions. It hinted that the European Central Bank (ECB) might want to expand quantitative easing (QE) as a measure to encourage stronger growth.

It warned the continuing weakness in Europe "could evolve into stagnation, with negative implications for the global economy".

The US and Japan have seen a greater focus on stimulus measures compared with Europe, where austerity measures have taken precedence.

 

It is evident that while the threat of a Eurozone break-up may have subsided, a long term solution to the debt crisis is yet to be found.

 

The problems in Eurozone have not gone away. Essentially people are either choosing to ignore them or are seeing what they want to see.

 

Currently unemployment continues to rise in countries such as Greece and Spain, a delayed solution may see the crisis escalate, a move which is likely to hurt investor morale.

 

Countries such as Greece and the Republic of Ireland that have been bailed out by international lenders continue to see their economies shrink.

Meanwhile larger economies such as Spain have imposed spending cuts in an attempt to avoid having to ask for a bailout. The recent problems in Cyprus served to highlight the problem.

 

The austerity measures in many countries - mostly in southern Europe - have combined tax rises with cuts in salaries, pensions, benefits and social services.

 

Apart from the social cost the spectre of unemployment represents a major threat to economic recovery within the EU together with all the global implications it brings.