Europe continues to weaken world economy, new report claims

OTTAWA—A day after new survey data released suggested the eurozone may be on the road to recovery, a new report from the Conference Board of Canada claims the region is hampering global growth.

The think-tank’s World Outlook—Summer 2013 predicts the global economy to expand by a “tepid pace of 2.5 per cent this year,” with the finger of blame pointed solely on Europe.

“Europe remains the main stumbling block to higher growth in the world economy,” Conference Board principal economist Kip Beckman said in a statement.

“The region continues to be plagued by record high unemployment rates, a fragile banking sector and high levels of government debt.”

Many banks in Europe remain under-capitalized and highly leveraged, and some have been operating with huge losses.

The Conference Board report warns another credit crisis in the eurozone cannot be ruled out if the European Union fails to address the issue.

Real GDP in the eurozone is expected to drop by 0.5 per cent in 2013, and a gain of only 1.1 per cent is forecast for 2014, according to the think-tank.

The Conference Board report was released one day after Financial information company Markit said its monthly purchasing managers’ index (PMI) for the region rose for the fourth month running, to 50.4 points in July from 48.7 the previous month, pointing to recovery.

According to the Conference Board, the slow global growth will begin to change as the United States economy picks up steam toward the end of this year, with growth in the world economy expected to increase to 3.2 per cent in 2014.