Desperate times lie ahead for the Eurozone – which is EU member states who use the Euro as their main currency – as economic growth slows, particularly in countries such as Italy where debt levels are already astronomically high at £2.2trillion. The Centre for Economic and Business Research said in its annual predictions for 2019 “internal contradictions” would force the Eurozone to “integrate economically” or “risk breaking up”. They added: “It is possible to defer the confrontation for a year or two but the boil will have to be lanced at some point since the Italians have clearly reached the point of austerity fatigue.”
Brexit turmoil both inside and outside of the Eurozone is likely to cut growth for the region in 2019, according to a Financial Times poll of economists.
A total 23 out of the 24 respondents, surveyed in mid-December, said they expected growth to be between 1 percent and 1.8 percent.
Growth is set to be sluggish compared to 2018 if the forecasters are correct, as the European Central Bank estimated growth to have been around 1.9 percent.
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Guntram Wolff, a director at Brussel’s based economic think tank Bruegel, said: “I would argue that risks to growth have increased and that the overall growth numbers will look worse than predicted by official institutions.”
Economic conditions could also worsen in 2019 because of escalating tension between the US and China over trade.
A trade war would hit Germany the hardest, which is the Eurozone’s largest and most export-dependent economy.
Europe’s largest economy saw Inflation rise by 1.7 percent in the year-on-year in December, compared to 2.2 percent recorded in the previous month.
Florian Hense, economist at Berenberg Bank, said: “The economic fundamentals look encouraging.”
“Having said that, we cannot rule out two major risks. First, politics may go badly wrong.
“Think trade, Brexit, Italy.
“Second, even if the big risks that are currently scaring companies and households fade over the course of 2019, the fear factor may take on a life of its own for a while.”
Jörg Krämer, chief economist at Commerzbank, said he was concerned that “a decade of de-globalisation lies ahead of us,” which would stump growth in the Eurozone which heavily relies on manufacturing exports.
Michael Heise, chief economist at Allianz SE, said: “Economic momentum in the eurozone has cooled notably following the Euroboom year of 2017.
“The accumulation of political risks — including a no-deal Brexit scenario, a renewed debt crisis in Italy and a further escalation in the trade dispute — is increasingly weighing on economic sentiment with firms proving more cautious in investment and hiring decisions.”