Negative economic growth may persuade the EU to give countries such as Spain softer deficit targets but there will be no let-up in the overall austerity drive as the continent struggles to draw a line under its two-year debt crisis. The EU has set a course and intends on following their path to failure.
The European Commission will release its latest 2012 and 2013 forecasts for the 27-nation bloc today. Sources believe it will show a steep fall in activity and kick off a new debate among member states about revising agreed targets for this year and next.
Will The EU Revise Their Austerity Program
Almost all economic indicators from Europe are pointing in this direction
One senior European official with direct knowledge of the matter told Reuters existing deficit goals would look increasingly unattainable and would likely be changed when the EU executive publishes another round of forecasts on May 11. May is right around the corner and there still does not seem to be an overall comprehensive plan to reverse the economic cycle and course of Europe farther into recession and debt.
The (European) Commission doesn't want to look ridiculous by insisting on unrealistic targets so it will have to make some adjustments, said the official.
According to other senior sources, the Commission could allow member states to exceed by a few decimals their targets for 2012 but stick to the objective for 2013, the date agreed by most countries to bring back their deficits below the limit of 3% of the GDP permitted by EU rules.
Alternatively, it could decide to give member states an extra year, until 2014, to reach this limit after updating its November predictions of 0.5% growth this year and 1.5% next.
In recent weeks, several countries, including Italy and Spain have questioned openly - or quietly - the German-led austerity drive and called for a more balanced approach between tough spending cuts and measures to boost their stricken economies and fight unemployment.
EU leaders discussed the issue at a summit in January and on Monday Britain, the Netherlands, Italy, Spain and eight other countries said the euro zone should try to concentrate on reviving growth in a bloc that produces 16% of global economic output rather than drastically cutting debt. This is a tough lesson learned by the UK, who too tried a strict approach using austerity measures. Harsh austerity measures my decrease debt but it also causes consumer confidence to dry up and production and growth the contract at a much faster rate than projected.
EUR/CHF Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3