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Spire comments on Europe’s debt crisis and the health of the global economy

19 June 2012
Channel NewsAsia – AM Live

Spire comments on Europe’s debt crisis and the health of the global economy

The debt crisis in Greece has hit a new low, and Spain and Italy are under threat. The recent change in Greek leadership offers some hope. In these turbulent times, how will the world economy respond? Leon Perera, Chief Executive Officer of Spire Research and Consulting, was invited to share his insights on Channel NewAsia – AM Live.

Perera remarked that despite the severity of Greece’s political crisis, there is no imminent danger of a messy Greek exit from the Eurozone. The Greek electorate has shown the political will to stay within the Eurozone by giving the mainstream New Democracy party the bulk of the popular vote. Perera added that the socialist victory in France reflected the new pro-growth sentiment in Europe. It made it more likely that Greece would be able to negotiate some marginal improvements to their bail-out package. As for Greece itself, it will be a long, hard slog to restore growth fundamentals.

On the other hand, growth prospects in the U.S. economy are down, with most economic indicators weakening considerably. Unemployment is inching up, and retail sales and industrial output are falling. With U.S. GDP growth expected to fall below 2 percent this year, Perera added that the Fed would most likely lower its growth forecasts but would probably not implement another round of quantitative easing measures yet.

Perera added that the Chinese government will almost immediately come up with a fiscal package to help stabilize the slowing economy. The China government is under a lot of pressure to be seen to be doing something on the economic front, given the Party Congress and impending leadership transition towards the end of 2012. In fact, fiscal stimulus may already have begun, after announcements of state investments in June that are bigger than usual.

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