Europe: The Epicenter of a Global Economic Earthquake

A big economic story can go underreported for only so long. Eventually it will show up in mainstream news headlines — a likely case in point is the euro zone’s developing deflationary trend.

The many summits, bailouts and stimulus packages of recent years have all failed to lift European Union economies, even though EU financial authorities have predicted otherwise.

The [European] Commission late last year forecast 0.1 percent growth in the euro zone’s economy for 2012.

Fox Business News, Feb. 22

The article goes on to say that the final 2012 GDP tally for the euro zone will likely be around minus 0.6%, substantially below initial projections.

In fact there’s already another revision.

The euro zone will not return to growth until 2014, the European Commission said, reversing its prediction for an end to recession this year and blaming a lack of bank lending and record joblessness for delaying the recovery.

The 17-nation bloc’s economy, which generates nearly a fifth of global output, will shrink 0.3 percent in 2013 … meaning the euro zone will remain in its second recession since 2009 for a year longer than originally foreseen.

Reuters, Feb. 22

This comes as no surprise to EWI European analyst Brian Whitmer.

[The European Central Bank and the International Monetary Fund] still anticipate growth to resume in 2013. All our analysis says that eurozone authorities will be forced to ratchet these forecasts much lower in the months and years ahead.

European Financial Forecast, November 2012

As Brian has anticipated, the evidence suggests that European Union financial officials will eventually also have to ratchet down their expectations for growth in 2014.

You see, very few analysts expect a full-blown deflationary trend. Yet when Robert Prechter wrote Conquer the Crash, he did indeed warn of global deflation, when most of Europe was living high on credit. The Publisher’s Preface of the book’s second edition notes:

Despite being a bestseller, Conquer the Crash garnered no notice whatsoever from the establishment media during the meltdown of 2005-2009. Perhaps its thesis is too radical for most writers to acknowledge. But reality may soon catch up with it. ….

The most dramatic among Prechter’s forecasted events are still to come.

And the epicenter of the economic earthquake ahead may be in Europe.

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