The answer is it depends who you ask. The New York Times put the question to five of us and our answers varied considerably. If there was any overlap in answers I would say it was our general agreement that the euro zone periphery will have/is having a double-dip recession and that the euro zone core will have a less pronounced slowdown.
Here’s what I would highlight from my piece – and it’s not the macro economy:
For me, the most worrying signs, however, come from the European banking sector. Contagion from the sovereign debt crisis has infected Europe’s banks, which hold large amounts of sovereign debt. French banks like Société Générale, Crédit Agricole and BNP Paribas have had difficulties in the wholesale lending markets while governments in Belgium and France were forced to support the Belgian-French bank Dexia last week. The situation is tantamount to a wholesale lending bank run.
One would not be overstating the case in drawing parallels to the fateful events in 1931 that spread from the Austrian bank Credit Anstalt to the rest of the European banking system and into the U.S., creating bank runs and depression. Until the banks take substantially more credit write-downs and recapitalize, this crisis will continue and get worse.
Read the other answers at the NYTimes website.
Source: Is Europe Sliding Into a Double-Dip Recession?, Room For Debate, NYTimes