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Eurozone - Negative growth


Eurozone “growth” will be between minus 4.1 per cent and minus 5.1 per cent this year. The European Central Bank’s latest six-monthly financial stability review suggests euro area banks have absorbed barely 60 per cent of losses estimated for 2007-2010.

Industrial production in the eurozone is being hit badly, with a drop of 1.9 per cent in April alone. The year-on-year decline is a staggering 21.6 per cent, so April’s figures provide no evidence of “green shoots”. And worse is to come. Eurozone banks could face cumulative total losses of $218 billion on their securities and an additional $431 billion of losses on their loan books, a total of $649 billion.

In 2007 and 2008 eurozone banks wrote off just $150 billion of their loan exposures, meaning $280 billion of estimated loan losses have yet to come home to roost. An International Monetary Fund report put expected write-downs by eurozone banks this year and 2010 at US $750 billion.

European companies face losses too: they must refinance £2.4 trillion of debts over the next few years.