The eurozone crisis tops a list of threats to the global economy followed by the risk of a “hard landing” in emerging economies, ratings agency Moody’s Investors Service said on Thursday.
“The main risks to the global macro outlook stem from a deeper than currently expected recession in the euro area, for example caused by deeper credit contraction,” Moody’s said in its latest macro-risk report.
The agency then underscored “the risk of a hard landing in major emerging market economies, including China, India and Brazil,” followed by “an oil-price supply-side shock resulting from resurfacing geopolitical risks.”
Finally, “the risk of sudden and sharp fiscal tightening in the US in 2013, given recent political gridlock” rounded out the list of major threats to business activity worldwide, Moody’s said.
It forecast overall economic growth of the G20 group of industrialised and emerging economies this year at 2.8 percent, a rate that could rise to 3.4 percent in 2013. In general, Moody’s said that risks to its global forecast were larger than foreseen in its previous report.
FURCHTBAR
A complete collapse of the euro would shave up to 10 percent off the German economy and even just the departure of Greece from the currency club bears substantial risks to business, according to government economic advisor Lars Feld. Feld, one of five “wise men” economists whose views help shape the public debate in Germany but often have little direct impact on policy, said recent estimates by the group suggested Germany’s gross claims from the euro zone are about 3.5 trillion euros. “When a good part of the claims would go in default, there would be insolvencies in small and medium-sizes firms and the economy would be hit,” Feld told a Frankfurt journalist club Wednesday night in remarks slated for publication on Thursday.
AGONIZING AUGUST
European business and consumer confidence fell sharply in August, with Spain reporting the biggest drop among major eurozone economies while France saw a rise, the European Union said on Monday.
The Economic Sentiment Indicator produced by the European Commission fell to 86.1 points across the 17-nation eurozone, down 1.8 points from July after its fifth consecutive monthly slide.
The indicator remained well below its long-term average of 100 points. The loss in confidence was particularly strong among consumers, retail trade and construction managers.
Spain’s score fell by 4.9 points and Italy by 2.4 points. Germany dropped by 1.0 point whereas France posted a 0.4-point improvement. The Netherlands was up by 0.6 points. Confidence in the eurozone service sector slid by 2.3 points. The comparable figure for industry remained broadly stable, although it fell markedly across the wider 27-nation EU.
