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Europe sputters { August 29 2002 } Original Source Link: (May no longer be active)
http://www.timesonline.co.uk/article/0,,3-397791,00.htmlhttp://www.timesonline.co.uk/article/0,,3-397791,00.html
World News
August 29, 2002
Europe's recovery runs out of steam
By Lea Paterson, Christine Buckley and Roger Boyes
EUROPE’s hesitant economic recovery is grinding to a halt, sending share prices tumbling and piling the pressure on the Continent’s leaders to kickstart growth.
Fears of a “double dip” European downturn yesterday triggered one of the largest falls in London shares since September 11, while many businesses have been scrambling to cut back expansion plans in the face of crumbling economic prospects. In the City, a rash of disappointing economic figures from across the EU sent the FTSE-100 index tumbling by more than 175 points to end the day at 4,274.
The 4.1 per cent daily drop was one of the largest since the post-September 11 collapse and matched falls triggered by the US accounting scandals earlier in the summer.
Concern yesterday focused on the sickly German economy as new figures dealt Gerhard Schröder, the Chancellor, a fresh blow in his efforts to win re-election next month.
Disappointing data from France, Spain and Belgium added to the mounting European gloom and fears about a renewed global slowdown are likely to dominate the annual gathering of world central bankers at Jackson Hole, Wyoming, this week.
Jim O’Neill, managing director at Goldman Sachs, the investment bank, said: “Markets have fresh concerns that the recovery could peter out. The US economy has lost the vigour from earlier this year, Europe remains mired with weak demand and structural problems while Japan shows little evidence of providing economic leadership for Asia and the world.”
In Germany, fresh signs emerged that the much-vaunted recovery had been derailed. The influential Munich-based Ifo institute said that business confidence had slumped to its lowest level since February as German managers became increasingly pessimistic about future economic developments. Ifo’s headline confidence gauge tumbled to 88.8 points in August from July’s 89.9, substantially below market expectations.
The strengthening euro and the dislocation of east and southern Germany by floods have added to the worries about Europe’s largest economy, with the Government’s forecast of 1 per cent growth this year now looking hopelessly optimistic.
Unemployment figures due out next week are likely to confirm the economic malaise and again show more than four million jobless.
Order books are down on last year and domestic demand is sagging. Department stores report full warehouses of unsold goods despite long weeks of summer sales.It is not only the German economy that is struggling to build on the momentum of earlier this year, with new figures from Spain and Belgium raising fears about growth elsewhere on the Continent. Spain and Belgium grew more slowly than economists had been expecting in the second quarter of the year, while France’s leading business group yesterday dismissed the Government’s growth forecasts as “absolutely unrealistic”. Medef, the French employers’ association, predicted that the economy would grow, at best, by 2 to 2.5 per cent next year. That compares with a government forecast of 3 per cent.
Analysts said that the UK would not escape unscathed from the slowdown on the Continent, with Gordon Brown’s optimistic prediction of 2 to 2.5 per cent growth this year looking increasingly unattainable. Stewart Robertson, of Lombard Street Research, said: “Even if growth revives in the next few months, a figure of only around 1.5 per cent looks more likely.”
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