Recession

Coming to a Country near You?

Matthew Lynn: 

Next eurozone crisis has begun and will lead to more money creation

Industrial output is in crashing. Retail sales have stagnated. Business confidence has dropped, and investment is heading south. A sharp slowdown might have been expected for Britain heading out of the European Union, America where the President is busily ripping up half a century worth of carefully constructed trade agreements, or China, which has been on a decade of wild, credit-fuelled growth. 

But the real slowdown is happening in the one place where few economists expected it. It is now painfully obvious that the eurozone is heading into a sharp recession.

The fleeting recovery of the 2017 and early 2018 now looks to have been fuelled purely by the two trillion of freshly minted euros the ECB threw at the economy. It has proved incapable of creating a self-sustaining recovery. Th ECB was expected to start normalising policy this year, ending QE and raising interest rates. In the face of the latest data, a rise in rates can now be ruled out. The central bank is far more likely to have to start printing money again by the spring -- but by then it may already be too late to pull the zone out of a slump.

 DYI