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Euro area: A Rising Tide Lifts All Boats Print E-mail
Long Term Forecasts | Written by Danske Bank | Dec 19 11 08:38 GMT

Euro area: A Rising Tide Lifts All Boats

  • The euro area economy faces significant headwinds and is most likely in recession currently. We expect the economy to shrink in both Q4 2011 and Q1 2012.
  • However, we do expect the recession to be fairly short as headwinds ease and some of them even turn into tailwinds. In particular stronger growth in the US and Emerging Markets will help underpin euro area growth during 2012.
  • Hence, although the euro area is likely to face slow economic activity for many years, we do expect the recession to be fairly short.
  • As growth indicators - such as Euro PMI - improve during 2012 it should help reduce global recession fears and underpin an improvement of the current very negative sentiment in the markets.
  • The main risk to growth remains that the debt crisis deepens and prolongs the recession.

Five reasons why the euro recession will be fairly short

  1. US recovery normally leads the euro area
  2. Emerging Markets to drive stronger export growth
  3. The recession is partly due to inventory build-up
  4. Fiscal headwind is significant but is not getting stronger
  5. Financial headwinds expected to ease slightly during 2012

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Danske Bank


This publication has been prepared by Danske Markets for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Markets´ research analysts are not permitted to invest in securities under coverage in their research sector. This publication is not intended for private customers in the UK or any person in the US. Danske Markets is a division of Danske Bank A/S, which is regulated by FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange. Copyright (©) Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.

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