1)Yet another eurozonecrisisin the spring if not before, when Spain and Italy have to refinance in aggregate over €400 billion of bonds. The euro might break up at this point, though European politicians are normallyable to respond to a crisis and I suspect that what will break up the euro will be the failure of most of the countries to take the tough medicine necessary to make their economies competitive over the longer term. We give it only a one in five chance of surviving in its present form for ten years. If the euro doesn’t break up, this could be the year when it weakens substantiallytowards parity with the dollar.2)Slower economic growth. As the boost from the end of destocking comes to an end, countries will have to rely on the fundamentals. And in the fast growing Eastern economies, growth will have to slow because of inflationary fears. For the UK, all this will combine with the effects of fiscal retrenchment as the government tries to bring borrowing under control. A double dip for the world economy is not likely because of the strength of the emerging economies. But it is well within the bounds of possibility for the UK.
3)Germany to be the Western economic superstaragain. German performance, in some sense subsidised by the eurowhich has the same effect for the German economy that the cheap renminbi policy has for the Chinese economy, is likely to continue to be stunning. With the costs of unification gradually absorbed and a highly competitive exchange rate, Germany is setting the pace in Europe. One of the interesting elements of Germany’s recent economic success has been the role of immigrants –primarily Turks but increasingly from other countries –who now seem to be boosting the German economy in the same way that their equivalents have boosted the British economy in the past 20 years.
Read all predictions here
Read all predictions here
