eu flags 88.
(photo credit: )
Europe continues to show signs of a tentative recovery with marginally positive
growth and other economic indicators stabilizing, according to the European
Restructuring Monitor quarterly.
There are however persistent concerns
over levels of public debt and, to a lesser extent, over the stability of the
The global economy is showing signs of a more robust recovery with
the International Monetary Fund revising growth predictions for this and next
year upwards by about half a percentage point. However, it also predicts that
Europe will under perform relative to the other advanced economies and that
downside risks have risen sharply amid renewed financial turbulence‚ related to
concerns over sovereign debt. The weakening euro offers growth possibilities for
export-oriented goods producers and may underpin private sector growth in the
Such growth will assume greater importance in a context of
widespread cuts in public spending.
Restructuring activity as captured by
the ERM continues its recent trend of decline, albeit one where job
continue to predominate over job gains.
Over the last quarter from April
1st to June 30th, the ERM reported 214 cases of restructuring. Of these,
were cases of restructuring involving job loss.
Total announced job
losses totaled approximately 50,000 in the quarter as against announced
creation of just under 25,000 new jobs before.
Based on standard economic
indicators, the European economy continues to show signs of
stabilization and a
gradual return to more normal patterns of growth after the extreme
2008 and 2009. The consequences of the economic crisis are however
include further episodes of smallscale crisis similar to that
sovereign debt crisis in Greece in early 2010. High levels of public
unbalanced budgets are problems common to many EU member states,
unkindly labeled PIGS (Portugal, Italy, Greece and Spain), and can lead
To what extent the recovery has been conditioned by
the exceptional stimulus packages - and loose monetary policy - in the
post-crisis period is a question that is about to be tested. A number of
states - with or without the prompting of the bond markets and sovereign
concerns - have decided that now is the moment to reduce the levels of
support and steer government finances towards balance and
Austerity packages have not been restricted to member states with high
sharply increased levels of sovereign debt or budget deficit. While the
sector to date has served as a stabilizing source of employment and
it appears inevitable that shrinking budgets will translate into public
restructuring and retrenchment in the coming years.
There remains a
polarization of views on the timing of withdrawal of public support
to those economies - including much of the EU - only slowly emerging
recession. In part, this is related to differing perceptions over
principal monetary risk is inflation or deflation.
economists Paul Krugman and Joseph Stiglitz have separately warned that
premature withdrawal of stimulus in the US and other developed economies
defeating and may undo the prospects of growth on which sustainable
must be based.
Unemployment in the EU has stabilized at 9.6 percent in
May 2010 but is nearly three percentage points higher than at its most
pre-crisis in early 2008. There were over nine million people fewer in
the EU in the first quarter of 2010 compared to the recent peak in
the third quarter of 2008 (approximately 210 million compared to 219.5
The majority of job destruction has been concentrated in manufacturing
construction with consequent disproportionate impacts on younger, male,
unskilled/semi-skilled workers in the private sector.
The author is the head of the International Department at GSCB Law Firm.