The eurozone’s economic rebound from the coronavirus pandemic is losing steam after a few months of improvement, according to a survey of business activity. The IHS Markit flash composite purchasing managers’ index for the euro area fell to 51.6 in August, down from 54.9 in July. According to a Reuters poll, even if a reading above the 50 mark indicates a majority of businesses reported an expansion in activity, the reading undershot the expectations of most economists, who on average had expected activity to plateau.
The recent resurgence of coronavirus infections in many European countries to levels not seen since May has triggered fresh quarantine requirements and localised lockdowns, raising doubts over the sustainability of the recovery.
The discouraging data comes a month after EU leaders struck a deal on a huge coronavirus recovery package. The €750billion (£668billion) coronavirus fund will be used as loans and grants to the countries hit hardest by the virus.
The remaining money represents the EU budget for the next seven years.
As many wonder whether the measures will ultimately deepen the bloc’s economic integration or cause its demise, a 1995 book titled “The Rotten Heart of Europe: the Dirty War for Europe’s money”, written by British economist Bernard Connolly, has resurfaced.
In the book, published by Faber & Faber, Mr Connolly argued there are no feasible solutions for the euro crisis without a complete breakup of the euro area.
However, “Nordic-style measures”, he noted, could be key to the continent’s economic survival.
Mr Connolly wrote: “If there are no feasible solutions for the euro crisis without withdrawals, possibly even complete breakup, what does that imply?
“One can have little doubt that serial withdrawals and, a fortiori, a breakup of the euro area will have horrible consequences, quite possibly including a new and bigger financial crisis.
JUST IN: Laura Kuenssberg’s warning to Corbyn about John McDonnell exposed
Mr Connolly concluded: “Preventing that might well call for ‘Nordic-style’ measures (so taxpayers were not asked to shoulder the whole burden of banks’ credit losses, for if neither banks’ creditors nor taxpayers are allowed to be hit by credit losses, savers assuredly will be hit via a different route, as governments are forced to generate rapid inflation), potentially involving the nationalisation of the whole financial sectors in many countries.
“If one is optimistic, one can see that as a chance to start a banking system again from scratch, with baking lice sense sold by governments to new, ‘good banks’, with non toxic assets in their balance sheets.
“If one is optimistic….”