Monday, January 02, 2012

Economic uncertainty

What will European leaders do to solve the economic uncertainty that continues to cloud the continent?

The New Europe Post has one set of ideas.
Rather than recovering strongly, sluggish Western growth is periodically flirting with recession at a time of high unemployment and multiplying debt concerns, particularly in Europe. In an amazing turn of events, virtually every Western country must now worry about its credit ratings, while quite a few emerging economies continue to climb the ratings ladder. We can now consider the image of Western delegations heading to emerging countries to plead, cap in hand, for financial support, both direct and through the IMF.

At first blush, this unusual convergence between Western and emerging countries seems to reflect what advocates of a new international economic order had in mind. But appearances can be misleading, and, in this case, they are misleading in a significant way.
Advocates envisaged an orderly process in which economic convergence accompanied and facilitated global economic growth. They foresaw a collaborative process guided by enlightened policymaking. But what is occurring is far different and more unpredictable.
As the Financial Times notes, various European leaders continue to deliver a message of concern to their nations

At least in the short term, what is predictable is that Asia and India will benefit from Europe's woes. Bloomberg notes in December, that was true.
Manufacturing expanded in India and China in December, indicating Asia’s fastest-growing major economies have so far withstood the fallout from Europe’s sovereign debt crisis.
India’s manufacturing grew at the fastest pace in six months, stoking inflationary pressure, and a Chinese manufacturing gauge rose by more than economists expected, suggesting that a slowdown in the world’s second-biggest economy may be stabilizing. In the euro area, output fell for a fifth month though the rate of decline eased slightly from November.
“The figures from today show we’re absolutely not seeing a hard landing,” said Andreas Rees, an economist at UniCredit Markets & Investment Banking in Munich. “There’s no massive uncertainty shock around the globe that’s weighing heavily on investment activity.”
Ripples from Europe’s debt turmoil have dented confidence among companies and consumers and hit global demand.

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