Don’t Worry, It’s Only a “Mild Recession”

Courtesy of Mish 

The economic clowns in the EU have finally acknowledged something that was blatantly obvious at least six months ago (and a lot longer if one factored in the likely effects of multiple austerity programs in numerous countries).

However, the economists’ new conclusion is about as silly as the “no recession” call that preceded it. The new forecast: there will be a recession in the eurozone but not the EU and it will be “mild”.

Please consider Euro zone economy to shrink in 2012.

The euro zone’s economy is heading into its second recession in just three years, while the wider European Union will stagnate, the EU’s executive said on Thursday, warning that the currency area has yet to break its vicious cycle of debt.

“Recent developments in survey data suggest that the expected slowdown will be rather mild and temporary,” EU Economic and Monetary Affairs Commissioner Olli Rehn told a news briefing following the release of the European Commission’s interim report on the EU economy.

The wider, 27-nation European Union, which generates a fifth of global output, will not manage any growth this year, the Commission said.

“The EU is set to experience stagnating GDP this year, and the euro area will undergo a mild recession,” it said.

“Negative feedback loops between weak sovereign debtors, fragile financial markets, and a slowing real economy do not yet appear to have been broken,” the Commission said.

Germany and France, the euro zone’s two largest economies, are likely to escape recession this year, growing 0.6 percent and 0.4 percent respectively, while Greece will enter its fifth year of economic contraction and Spain will shrink 1 percent, the Commission said.

Alternate Viewpoint

Let me reiterate things I have said many times: Germany and France will not escape recession, the German export machine will see a shocking slowdown (likely billed as “no one could have possibly seen this coming”), the overall EU will face a recession with the UK leading the way (the UK is highly in recession already), and these recessions will be neither mild nor fleeting.

By the way, a “negative feedback loop” is self-correcting by definition.

Negative feedback occurs when the output of a system acts to oppose changes to the input of the system, with the result that the changes are attenuated. If the overall feedback of the system is negative, then the system will tend to be stable

The writer meant a positive feedback loop (with negative consequences).

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