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EUROZONE: No recession but risks very high in 2013

07 October, 2012

Euro zone economy for 2013 is poised to contract by 0.1%, avoiding recession, Economist Intelligence Unit Regional Director for Europe Laza Kekic has said.

Kekic, who was addressing the first session of an “Economist” conference in Nicosia on Monday, noted that a 2% contraction for 2012 and a contraction by a few decimal points for 2013 are forecast for the Cyprus economy while it is expected to follow a recovery process between 2014 and 2017 in line with the euro zone.

However, he emphasized the risks present due to the island’s economy great exposure to the Greek economy. As far as Greece is concerned he said that most probably it will not exit the euro as things stand at the moment.

“The probability is that the euro zone will keep together”, he noted.

Referring to the euro zone he said the unit’s forecast is for contraction of 0.4% in 2013, adding that it would have been much worse were it not for the resilience of the German economy.

For 2013 the euro zone economy “is poised on the edge at 0.1%, so not a recession but it goes without saying that the risks are very high”, he stressed.

Kekic also said that the euro zone crisis should be contained by 2014. He presented some scenarios as regards economic prospects on a global level. The 60% scenario foresees high unemployment and weak demand in rich countries, less government spending, a mending US economy and a growth in the order of 8% of the Chinese economy.

On his part Europe Editor of “The Economist” John Peet expressed the view that it would be premature to say the worst is over in the crisis. Referring to the euro zone, he said the bloc is only doing slightly better than a few months ago, noting that four countries are either in a rescue programme or are preparing to enter it. Spain, he said will in all likelihood be the next country to enter the programme.

The outlook for the euro zone is pretty bleak, he said, with the economies of Greece, Portugal and Spain shrinking painfully and rapidly.

New setbacks and uncertainties are casting their shadow in the global economy outlook said during his address Director of the IMF Offices in Europe Emmanuel van der Mensburgghe. Unemployment has been elevated in many parts of the world and output has been sluggish in advanced economies, he noted. Unemployment is expected to remain high, he added.

The economy of Europe contracted by 2.5% in 2012, he said, noting that 2013 will see only slight growth.

He further highlighted the fact that a strong commitment towards a robust monetary union would restore faith in the EMU.

Addressing the conference Head of the European Parliament office in Cyprus Tasos Georgiou spoke of the importance of dialogue. Placing significant issues that affect citizens’ lives in the public agenda and promoting dialogue is one of the foremost priorities of the European Parliament, he said. This, he added, is why the office of the EP in Cyprus has co-organised the Economist conference, one of the most notable of its kind.

Agreement on the Multiannual Financial Framework 2014 – 2020 can be achieved by the end of the year, was the message conveyed by Deputy Minister on European Affairs, Ambassador Andreas Mavroyiannis, who highlighted Cyprus` modest efforts as the EU Council Presidency to act as "an honest broker" and achieve the best possible results.

The Cyprus EU Council Presidency maintains that agreement is achievable at the European Council of November 22 and 23, he said. “The momentum is there and increasing”, Mavroyiannis stressed.

He pointed out that the MFF is a most formidable tool for fostering growth and job creation for exiting the crisis and therefore requires and deserves a more consensual attitude. At the same time he credited all stakeholders with sufficient common sense, as he said, not to take the risk of worsening the crisis.

The EU process lost steam, EP Vice President Anni Podimata said, pointing out that the reasons lie with the fact that Europe lacked a greater goal to mobilise itself towards further integration.

“I believe that this lack of vision, together with the institutional deficiencies, explains to a great extent, Europe’s difficulties in dealing effectively and efficiently with the crisis”, she underlined.

Highlighting the fact that “significant responsibilities lie at the national level”, she stressed that Europe has to reassure its commitment to its fundamental values and principles not only as a means to successfully confront economic crisis but also to eliminate as early as possible the signs of political crisis that the raising of anti-european voices promise to cause to EU’s future

On his part Greek Minister of Interior Evripides Stylianides called for “glocalisation” instead of “globalization”. We need to go return to our roots, he said, adding that if we wish to be stronger when we exit the crisis we need to look into achieving “more Europe” and to turn our disadvantages into advantages.

Europe, he noted, has achieved a lot such as promoting democracy, protecting human rights and promoting a social market economy. However, he pointed out that pro – Europeans had in the past given in to Euro-skeptics not insisting for a simultaneous and economic union. We have built a common ship to withstand calm seas, he said, adding that now that the storm has come we don’t have the tools to face it.