Europe should avoid recession in 2012, is in better shape now than after the 2008 global financial crisis, says French central bank governor Noyer
November 30, 2011
– Europe's debt crisis is undermining economic growth, but the continent should avoid a recession next year, French central bank governor Christian Noyer said Wednesday.
Europe's economy is in better shape now than in the aftermath of the 2008 global financial crisis as corporate balance sheets and banking sector liquidity and credit levels remain strong, said Noyer, who is also a member of the European Central Bank's governing council.
"We don't see the reasons for a recession," Noyer told reporters in Singapore. "The economy is not dropping like what we saw in 2008 and 2009."
Yields on Italian sovereign bonds rose Tuesday to the highest since the euro currency union began in 1999 amid investor concern contagion could spread from a possible default of Greek debt.
Noyer said rising Italian bond yields reflect an overestimation of the country's risk of default and are symptomatic of a lack of confidence that is hurting economic growth.
"The issue really is confidence," he said. "When there is turmoil in the markets like what we're seeing there is a tendency for households and corporates to postpone some investments or consumption."
Noyer said European must stick to promises to cut spending and debt levels.
"What's needed is to restore confidence," he said. "The economy could accelerate quite rapidly if confidence comes back."
The International Monetary Fund has forecast Europe's economy will grow 1.6 percent this year and 1.1 percent next year.
Noyer rejected the idea that the 17-nation euro union should break up, a move that some analysts argue would allow countries such as Greece to devalue their currency and regain export competitiveness and economic growth.
"It would be extraordinarily counterproductive to have any thought in that direction," Noyer said. "The idea that it would provide benefits does not stand at all."
© 2020 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.