Monday

15th Apr 2024

Eurozone in danger of permanent stagnation, World Bank says

  • The eurozone is at risk of permanent stagnation, the World Bank has warned in a new report (Photo: World Bank Photo Collection)

The eurozone is in danger of sliding into permanent stagnation, the World Bank has warned in a new report.

“Weak consumption, anaemic investment and low inflation could feed on each other in a deflationary spiral,” across the single currency bloc, states the Global Economic Prospects report by the World Bank published on Wednesday (14 January).

Read and decide

Join EUobserver today

Get the EU news that really matters

Instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

After growing by an estimated 2.6 percent in 2014, the global economy is projected to expand by 3 percent this year, far higher than the sluggish 1.1 percent forecast for the eurozone in 2015. The currency bloc saw a mere 0.8 percent growth rate in 2014.

The report adds that “recovery has been sputtering in the Euro Area and Japan as legacies of the financial crisis linger”.

“The global economy is still struggling to gain momentum as many high-income countries continue to grapple with the legacies of the global financial crisis and emerging economies are less dynamic than in the past,” said Kaushik Basu, the World Bank’s chief economist.

“Worryingly, the stalled recovery in some high-income economies and even some middle-income countries may be a symptom of deeper structural malaise,” he noted, adding that “as population growth has slowed in many countries, the pool of younger workers is smaller, putting strains on productivity.”

The bank believes that developing countries will be the strongest economic performers in 2015, benefiting from the recent slump in oil prices, a stronger US economy and low global interest rates.

It also asserts that the collapse in oil prices, which has seen the price fall from over $100 a barrel last July to below $50, should lead to an uptick in demand in most oil-importing countries.

The bank has also urged the European Central Bank (ECB) to embark on a money-creation programme to boost growth.

The ECB’s governing council is poised to launch its own government bond-buying programme - known as quantitative easing (QE) - and could do so as early as its next meeting on 22 January.

The Frankfurt-based bank’s president, Mario Draghi, has dropped several hints that the ECB will soon follow in the footsteps of the US Federal Reserve and the Bank of England hoping that injecting more cash into the economy will increase demand.

However, such a step is viewed by economists and market analysts as the ECB’s option of last resort, and several members of the ECB’s governing council, including German representatives Sabine Lautenschlager and Jens Wiedmann, remain deeply sceptical.

ECB bond-buying will 'not be a cure'

Nobody should mistake an injection of more cash into the eurozone economy for an economic cure, says one of the World Bank authors of a recent bleak report on the eurozone.

Opinion

Private fears of fairtrade activist for EU election campaign

I am not sleeping well, tossing and turning at night because I am obsessed about the EU election campaign, worried by geopolitical tensions, a far-right next parliament, and a backlash against the Green Deal, writes Sophie Aujean of Fairtrade International.

Latest News

  1. EU puts Sudan war and famine-risk back in spotlight
  2. EU to blacklist Israeli settlers, after new sanctions on Hamas
  3. Private fears of fairtrade activist for EU election campaign
  4. Brussels venue ditches far-right conference after public pressure
  5. How German police pulled the plug on a Gaza conference
  6. EU special summit, MEPs prep work, social agenda This WEEK
  7. EU leaders condemn Iran, urge Israeli restraint
  8. UK-EU deal on Gibraltar only 'weeks away'

Stakeholders' Highlights

  1. Nordic Council of MinistersJoin the Nordic Food Systems Takeover at COP28
  2. Nordic Council of MinistersHow women and men are affected differently by climate policy
  3. Nordic Council of MinistersArtist Jessie Kleemann at Nordic pavilion during UN climate summit COP28
  4. Nordic Council of MinistersCOP28: Gathering Nordic and global experts to put food and health on the agenda
  5. Friedrich Naumann FoundationPoems of Liberty – Call for Submission “Human Rights in Inhume War”: 250€ honorary fee for selected poems
  6. World BankWorld Bank report: How to create a future where the rewards of technology benefit all levels of society?

Join EUobserver

EU news that matters

Join us