Hopes of a rapid rebound from the recession have taken a knock as more signs emerge that the recovery from last year’s housing and financial market meltdown will take longer than expected.
That comes against a background of continued tight credit conditions, a reluctance to spend by companies and mounting job losses. The latest survey of purchasing managers in the euro zone suggests the recovery has stalled and what growth there is seems to be the result of government stimulus measures. The International Monetary Fund’s chief economist, Olivier Blanchard, told euronews that talk of exit strategies from stimulus packages is premature. He said: “Surely, now, it is not time to take away the fiscal stimulus or to start increasing interest rates. The economy is very weak, private demand is very weak. If you think about consumers, they are not in the mood to spend. If you look at firms, they are not in the mood to invest. So, if you were to take away the stimulus, you’d basically stop the recovery.” With US interest rates near zero, economist do not expect any short-term changes from the central bank, the Federal Reserve, as it continues to try to stimulate the world’s largest economy.