The outlook for the European economy has continued to deteriorate as the global financial crisis has intensified and the international environment has worsened. At the same time, domestic housing markets have weakened and business confidence has slumped. We still expect a relative lack of fundamental imbalances to mean that the downturn in most parts of the region is shallower and shorter than those likely in the UK and US. Meanwhile, sharp falls in inflation should allow the ECB and other central banks to cut interest rates significantly further – we now expect ECB rates to fall to 1.5%. But this won’t prevent the euro-zone economy from contracting by around 1% in 2009.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services