Majority Of Global Investors Predict Recession In Europe: Report
Three-quarters of global investors predict that Europe will fall into a recession in the next 12 months, according to a Bloomberg survey released Thursday.
Nearly three-quarters of global investors say that at least one country will leave the Euro Zone in the next five years, according to the poll, while 40 percent predict that at least one country would abandon the euro in the next year. More than a third of global investors said they believe that the European sovereign debt crisis will "derail" the global economy over the next year.
Even as the German parliament voted Thursday to expand the euro zone bailout fund, the poll highlights investors' concerns that the region won't be able to avert a crisis. Greece faces the prospect of running out of cash in October, according to Reuters, and experts and investors believe that steps beyond what the German parliament passed Thursday will be required to keep the region on solid footing, according to the Associated Press.
The debt of Italy alone amounts to nearly two trillion euros, and the combined debt of Greece, Spain, Portugal, and Ireland adds up to about 1.3 trillion euros. The bailout fund amounts to 440 billion euros.
Nariman Behravesh, chief economist at IHS Global Insight, told The Huffington Post earlier this week that to stave off crisis, the European Union and European Central Bank need to guarantee the sovereign debt of troubled countries such as Spain, Ireland, Portugal and possibly Italy, while recapitalizing European banks -- a project that could cost as much as $2 trillion to $3 trillion combined. But many economists, including Behravesh, expressed doubt that European leaders have the political will to unite and push the measures through.
"It's hard to find a European leader with any long-term vision," Harvard economist Richard Cooper told The Huffington Post.
If the European Union begins to disintegrate, it could have major repercussions for the American economic recovery, according to international economists interviewed by The Huffington Post. U.S. banks would lend less, American investments in Europe would not pay off, and consumers would purchase fewer American exports, because a cheaper euro would make European exports cheaper. According to economists, a substantial crisis in Europe would be likely to push the already fragile American economy into a double-dip recession.
CORRECTION: A previous version of this post incorrectly stated that three-fourths of global investors expected a country to withdraw from the European Union in the next five years. They expect a country to withdraw from the Euro Zone.