The euro zone: choose your own adventure

October 15, 2012

Forecasts about the future for the euro zone economy are starting to resemble a multiple-choice novel. Are you an economist working for an Anglo-Saxon institution? Then turn to p.65 — “Recession for the euro zone”. A German bank? Go to p.80 — “Happy days are here again!”

That simplifies the case slightly, but there’s more than a grain of truth in it. We’ve noted repeatedly that predictions about the euro zone are coloured heavily by whether someone works for an employer based inside the currency union or not.

In the past, analysts have been reluctant to forecast outright contraction for major economies.

In the latest Reuters poll, 12 out of 71 economists stuck their neck on the line to say the euro zone economy will shrink next year, rather than grow, and it’s interesting to see who they were.

Ten of them were all from institutions based outside the euro zone — mainly in Britain and North America. The remaining two were French.

Interestingly, the poll’s three most optimistic respondents, who expect the euro zone economy to expand around 0.8-0.9 percent next year, were from Deutsche Postbank, BHF-Bank and Berenberg — all German institutions.

Graphic by @scottybarber

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