Stagnant Europe the class laggard as G20 takes stock

Sun Apr 14, 2013 3:07pm EDT
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By Alan Wheatley, Global Economics Correspondent

LISBON (Reuters) - After a bungled bailout of Cyprus, the recession-stricken euro zone will stand out for the wrong reasons when finance ministers meet in Washington this week to run the rule over the global economy.

China on Monday is likely to report a growth rate of 8 percent for the first quarter, according to economists polled by Reuters.

In the United States, figures on housing starts and a pair of regional Federal Reserve surveys are expected to depict an economy that is far from firing on all cylinders but is at least chugging along.

And Japan is back. Animal spirits and stock prices are rising in response to the Bank of Japan's aggressive new monetary stance aimed at ending two decades of deflation.

What's more, Prime Minister Shinzo Abe has shown an appetite to inject more competition into the economy by reaching a deal with the United States on Friday to pave the way for Tokyo to join transpacific free trade talks.

By contrast, the European Union's growth strategy has been a failure and the economy will continue to stagnate unless bold steps are taken, according to a study commissioned by the EU itself.

The 17 countries that use the euro were in recession in 2012 and will probably contract further this year. The sovereign debt crisis has mutated into a crisis of confidence, undermining consumer demand and the willingness of businesses to invest.

"It's so bad things can't get any worse," said Steen Jakobsen, chief economist with Saxo Bank in Denmark. "The man in the street and companies are as disillusioned as they have ever been."   Continued...