Industrial production across the 19-nation euro area is falling at the fastest pace since the financial crisis and a deteriorating demand is evident. In its latest quarterly forecasts, the European Commission warned eurozone growth will slow to 1.3 per cent in 2019 from 1.9 per cent in 2018. Growth is expected to recover slightly to 1.6 per cent in 2020, but the new estimates are less optimistic than the Commission’s previous forecasts in November.
The gloomy forecasts have inevitably spooked investors, who fear the crisis dominating the eurozone could drag down the global economy with it.
Salman Ahmed, chief investment strategist at Lombard Oliver, told Bloomberg: “The concern I have right now is in Europe.
“It’s clear China is going through a slowdown, but there’s also a strong amount of stimulus in the pipeline.
“However, in Europe, things are deteriorating quite fast.”
According to to two leading economists, by 2050, Brussels will account for less than tenth of the world’s economy.
In 2018 book, “Clean Brexit: Why Leaving the EU still makes sense”, Liam Halligan and Gerard Lyons wrote: “The EU, while still a major economic region, is not the force it once was.
“In 1973, when the UK joined the EEC, the resulting nine member states accounted for 26 per cent of the world economy.
“Now, with no fewer than twenty-eight members, the EU’s share of global GDP is just over 20 per cent.
“Credible forecasts suggest the EU 27 ‘will account for less than a tenth of the world economy by 2050 … which will be less than India’.
“While the EU has been shrinking as a proportion of global GDP, the share of UK exports that are sold in the EU has also been falling – from 61 per cent in 1999 to 56 per cent in 2006 and 44 per cent in 2015.
“The direction of travel is clear.”
The economists noted that attempts to bind nations together in a regional supranational body, by protectionist barriers, is not only “backward-looking” but also damages to the economy of such nations.
They argued that the EU’s failure is illustrated most starkly by its monetary union.
Mr Halligan and Mr Lyons added: “The single currency, which ‘most economists’ said the UK must join back in the late 1990s, is doing untold damage, spreading economic stagnation across much of southern Europe.
“Locked in a high-currency straitjacket, Greece and Spain are suffering from 40–50 per cent youth unemployment.
“Italy, having barely grown since the euro’s launch in 1999, could face a major banking crisis which, given the size of the Italian economy, has the potential to spark a global systemic meltdown.”
The authors noted that as they are “unable to depreciate their currencies”, less productive Eurozone members are being “sacrificed” on the altar of further European centralisation.
They added: “If the euro ever did implode, which looks entirely possible at some stage, the big EU economies would pick up the tab.
“For now, global reflation, which is boosting the world economy, has provided a temporary reprieve.”