Sunday, February 19, 2012

Don't count on Eurozone's recession to be "shorter and shallower"

Credit Suisse has changed their forecast for the Eurozone GDP growth. The latest projections seem to be consistent with German decoupling discussed earlier, but may in fact be too optimistic - particularly when it comes to Italy and France. Both of those nations' credit markets are nearly frozen with a dysfunctional financial system that relies almost entirely on central bank financing.

Old and new Eurozone GDP forecast from Credit Suisse

The CS forecast decreases periphery growth projections (though leaving Italy unchanged), while increasing GDP for the Eurozone core. The wording used by CS with respect to the impending Eurozone recession is "shorter and shallower". Some three years ago the same terminology was used by many forecasters to describe the US recession.  Remember "short and shallow" and "V-shaped"?
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