Wall Street Journal
September 22, 2011
It is now clear that euro-zone economy stalled in the third quarter, adding a new risk factor to Europe’s government debt crisis.
Activity in both the manufacturing and services sectors this month has slipped into negative territory for the first time since the recovery from the last recession, according to a survey of purchasing managers published Thursday. And the trend points south.
UniCredit economist Marco Valli now sees “a material (and rising) risk of outright GDP contraction” in the fourth quarter of this year.
This has serious implications for the euro zone’s chances of surviving its sovereign debt crisis in one piece. For a start, governments will have to reopen their 2011 and 2012 budgets to look for more cuts before the ratings agencies notice discrepancies between plan and reality.
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