Monday, October 31, 2011

Growth Key for Euro-Zone Deal

by Sudeep Reddy

Wall Street Journal

October 31, 2011

Despite all the cheering about Europe's latest debt deal, worries are mounting that it won't succeed without stronger economic growth.

At the current pace of expansion, unemployment will stay high and incomes will stall. Debt-saddled governments will have an even tougher time generating revenue to pay bills. That could spark more default fears or higher interest rates in Greece, Italy and others under pressure.

Projections for global growth have been falling. The forecasting firm IHS Global Insight now expects the world economy to expand just 3% this year and next, down from 4.2% in 2010. The U.S. is forecast to grow just 1.4% next year, a pace that could push the 9.1% jobless rate higher. The 17-nation euro zone, meanwhile, will flirt with recession in 2012 with projected growth slightly above zero.


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