Fears UK Will Be Hit By New Euro Recession

The euro crisis is back. But this time it’s different.

That’s the general gist of the discussions at the International Monetary Fund meetings in Washington this week.
For this time around the meetings - a key opportunity for policymakers to catch up on the state of the global economy - have coincided with a fresh bout of fear over the euro area.

This isn’t the same kind of crisis the single currency faced a couple of years ago, when there were genuine worries that it might break up.Instead, the concern is that it simply hasn’t recovered fully from the recessions of recent years. Worse: it may soon slump back into another recession.



Why? In large part because of long-term problems in the continent: weak growth, poor demographics and unreformed regulatory systems.

The problem is that this time around there is even less clarity about what to do about it.

The French are determined to borrow and spend more to try to boost growth.So are the Italians. The problem is that doing so will mean they will break the supposedly iron-clad fiscal rules laid down by eurocrats in the teeth of the crisis.

The Germans are determined to keep control of their public finances, but are being urged by most of their neighbours to spend a bit more and boost demand. Though no-one is courageous enough to tell them to their face.

That’s the real reason why the IMF has spent most of the past week telling European countries to spend more on infrastructure.
You only have to watch our interview with IMF deputy managing director David Lipton to see how delicate a dancing act the Fund is having to perform here.
Meanwhile everyone, including George Osborne, has been looking towards the European Central Bank, indicating that they might be wise to consider going all in and doing full-scale quantitative easing.

Except that the ECB and central banking insiders insist they have already done enough - and that it’s up to the politicians to do more.