Tags: Lachman | economic | outlook | Europe

AEI's Lachman: Economic Outlook in Europe Remains Bleak

By    |   Thursday, 09 January 2014 07:07 AM

European economies remain in trouble, despite the usual claims by European officials that the outlook is growing brighter, says Desmond Lachman, a resident fellow at the American Enterprise Institute.

"European Central Bank President Mario Draghi and European Commissioner for Economic and Monetary Affairs Ohli Rehn are now again declaring that Europe has finally turned a corner and that a sustained economic recovery is underway," he writes in The Wall Street Journal.

"Sadly, there are all too many reasons to think that their confidence will prove to be as misplaced in 2014 as it has been in the past."

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Policy is a big part of the problem — specifically Europe's insistence on austerity, Lachman says.

"Yet in 2014, budget austerity — albeit of a lesser degree — will continue to be applied by most euro countries."

Meanwhile, "there is every reason to fear that Europe's credit crunch, which has already resulted in the fastest pace of credit contraction in the eurozone's 15-year history, will intensify in the year ahead," he notes.

That's because European banks have been slow to recapitalize before the European Central Bank's asset-quality review exercise.

"It would be comforting to believe European policymakers' soothing reassurances about the economic and political outlook. However, if their past forecasting record is a prologue to the future, one would be mistaken to take them too seriously."

Capital Economics analyst Ben May shares some of Lachman's pessimism, though he has a conflicting view about austerity.

"Debt is still very high, as is unemployment," May tells Voice of America. "There's a need for further austerity in some of these countries, and there's a growing unwillingness amongst the population to accept that."

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Economy
European economies remain in trouble, despite the usual claims by European officials that the outlook is growing brighter, says Desmond Lachman, a resident fellow at the American Enterprise Institute.
Lachman,economic,outlook,Europe
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2014-07-09
Thursday, 09 January 2014 07:07 AM
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