Business   

European economies facing recession

By Batuk Gathani

BRUSSELS JUNE 7. According to latest data released by the European Central Bank, the euro zone economy is contracting at an accelerated pace and "flirting with recession''.

It is argued that the euro zone contraction is likely to push the ECB towards an interest rate cut.

The German economy is faced with the prospects of negative growth, with shrinking flow of investment funds and rising unemployment.

All this is happening amid the revelation of deep divisions within the German Government over the strategy of containing the widening budget deficit due to the shrinking tax revenues and rising welfare costs.

Then there is also concern over the number of companies going bankrupt in the euro zone due to the recessionary trading conditions on the domestic front and shrinking exports.

Due to the high domestic labour costs and rising value of the euro, coupled with the European companies' inability to retrench personnel due to rigid labour laws, the competitive edge of major European manufacturing companies is shrinking.

Today, major European companies are managing to survive because of their higher technical and management expertise.

The gross domestic product growth rate in the euro zone is hovering at 0.5 per cent mark and in May it hit the lowest level for the past 14 months.

Leading European economists have called for a 0.5 per cent cut in the interest rate.

The ECB may respond to the request, although the bank's governing council has warned that any easing of the interest rate now would be too late to prevent economic stagnation in the region. Currently, China is emerging as a new magnet for lucrative trading and investment opportunities for major European companies.

It is also argued that it is time to bring China into the Group of Nine richest countries.

The Chinese economy is rated as far bigger than that of a Group Eight member like Italy and is almost three times the size of Russia's. China exports more manufactured goods than Canada, Italy or Russia.

Above all, China is emerging as a market of some 1.3 billion consumers.

Hence, with the rising prospects of recession, the European economic powers are increasingly looking at China and Africa for better trade and investment prospects.

Printer friendly page  
Send this article to Friends by E-Mail

Business

News: Front Page | National | Southern States | Other States | International | Opinion | Business | Sport | Entertainment | Miscellaneous |
Advts: Classifieds | Employment | Obituary |

Stories in this Section

• Forex reserves cross $81b mark
• European economies facing recession
• Digital's 'end' is nostalgia time for Indian computer community
• Brazil, India, South Africa form trade bloc
• CII delegation for U.S.
• India-Mercosur trade agreement to be signed soon
• Revival in fortunes of CV sector
• Telia of Sweden exits Bharti Mobile
• RIL research centre's feat
• SAIL to focus on branded products
• Digital GlobalSoft inks pact with HP
• RBI launches currency awareness campaign

Copyright © 2003, The Hindu. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu