Gerard Lyons, the chief economist at Standard Chartered predicts that the eurozone will contract by 1.5% next year, while the UK will suffer a fall in output of 1.3%
Posted by: Larry Elliott economics editor
Sunday 11 December 2011
A year ago, it was assumed 2011 would see life return to normal. Europe would sort out its little local difficulties, China and India would power along, and Barack Obama would use a resurgent US economy as the springboard for his re-election campaign.
One indication of how much things have changed is that back then, there was speculation on the timing of the first increases in interest rates in the UK and the US to fend off rising inflationary pressures. Many in the City thought that May was the likeliest month for the Bank of England to act. Wiser heads said May 2013, and today even that looks a touch on the hasty side.
Instead, 2011 ends with the euro fighting for its life, Britain weighing up what life might be like outside the EU, China fending off a hard landing, America in political gridlock and unemployment globally above 200 million and rising. Apart from that, everything’s going swimmingly.
For those who like their humour black, there are some ironies to be savoured. British governments for the past three decades have had an aversion to the idea of picking winners, with the one exception of the City of London. That “winner” proved to be the biggest loser of the lot, yet David Cameron decided that defending the interests of this tarnished special interest group should be Britain’s priority at last week’s summit.
The real reason for objecting to the creation of the Herbert Hoover Appreciation Society (or fiscal stability pact) created by Angela Merkel and Nicolas Sarkozy is that it condemns Europe to permanent deflation and high unemployment, so the prime minister may well have made the right decision for the wrong reasons.