PwC Outlines Impact of Liquidity Injection from ECB on Eurozone

Michelle Remo, “Big 4″ observer
December 28, 2011 /

The impact on Germany, France, Italy and Spain of monetary expansion through a liquidity injection from the European Central Bank, orderly defaults for the most indebted countries, Greek exit and a new currency bloc as four potential outcomes of the Eurozone crisis have been outlined in a PwC report “Economic Views – Eurozone”.

The report analyses each of these scenarios and outlines the impact of each in terms of potential GDP growth figures for each of these countries from 2011 until 2013.

According to a second PwC report, “Economic Views – Global”, the US economy is now expected to grow at 2% next year, below its trend rate.

“We anticipate developing economies particularly those with an increasingly affluent consumer base and unencumbered by a high debt burden will contribute around three-quarters of global economic growth in 2012,” PwC said.

Significant opportunities are expected to arise for businesses exporting to China which will continue to grow in importance while the Remnibi appreciates and India through the further opening of its vast internal markets.

Yael Selfin, head of macro-consulting and a director in PwC’s economics team, said, “Eurozone policymakers are under extreme pressure to find a credible solution to the sovereign debt crisis that is engulfing the region.

“Once a resolution is found, the Eurozone that re-emerges is likely to be very different to the one we know today. The implications for businesses within and outside the region are vast and we advise businesses to stress-test their plans across a range of scenarios.

“Despite anticipated growth in the US economy, and developing countries contributing an increasing amount to global economic growth, global economic growth as a whole will slow down in 2012, followed by a slight pick-up in 2013.

“A gradual return in confidence, pick up of private sector activity in advanced economies, and a steady easing of credit conditions will drive growth in 2013.”


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