MidnightWatcher – Prophecy in Motion

“The scale of the economic challenge facing the eurozone was underlined on Thursday by a new report predicting slower growth and higher levels of debt in the 17-country trading area.

As the political elites in Greece and Italy struggled to agree new governments under intense pressure from capital markets, the Brussels-based European Commission lowered its forecasts for next year’s economic growth in the single currency bloc to 0.5 per cent from the 1.8 per cent it foresaw in the spring.

The European Union’s executive body said sovereign debt levels in the eurozone would increase next year by more than previously thought, reaching 90.4 per cent of overall gross domestic product, up 88 per cent this year.

A separate monthly bulletin from the European Central Bank of professional forecasters compounded the warning. It showed predictions for eurozone growth next year had halved to 0.8 per cent.

‘Growth has stalled in Europe and there is a risk of a new recession,’ said Olli Rehn, the commission’s economic chief.

The gloomy predictions came amid growing evidence that the eurozone’s economic troubles were damaging the prospects of the global economy.” Read more.

France and Spain could be next to suffer Euro crisis – “Fears about the costs of a euro break-up or a massive bail-out for Rome pushed up the borrowing costs of governments across Europe. Most significantly, there was a sharp rise in the gap between the borrowing cost for Germany – the euro’s strongest member – and other countries. The gap or “spread” between French and German bonds yesterday hit 1.46 percentage points — the highest level for almost 20 years and three times the gap recorded a year ago — as the borrowing cost for France reached 3.179pc. The close relationship between France and Germany is regarded as the bedrock of the EU’s political and economic co-ordination. A widening gap would heighten fears for the entire European project.” Read more.

European debt crisis spiralling out of control – “Fears that Europe’s sovereign debt crisis was spiralling out of control have intensified as political chaos in Athens and Rome, and looming recession, created panic on world markets. Reports emerging from Brussels said that Germany and France had begun preliminary talks on a break-up of the eurozone, amid fears that Italy would be too big to rescue. Despite Silvio Berlusconi’s announcement that he would step down as prime minister once austerity measures were pushed through parliament, a collapse of investor confidence in the eurozone’s third-biggest economy sent interest rates in Italy to the levels that triggered bailouts in Portugal, Greece and Ireland.” Read more.