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Scary Chart Reveals What Europe's Economic Future Looks Like


Painfully slow growth.

Though the crisis in Cyprus remained calm Thursday as the country reopened its banks for the first time in 12 days, the European Union isn't out of the woods yet.

In fact, based on a new report from Bank of America Merill Lynch Global Research, the 27-member union's economic future doesn't look very bright -- at all.

The following chart from the BofA report shows that the EU may be looking at “sluggish growth,” as the Washington Post’s Brad Plumer puts it, for at least a decade:

Click for a larger image.

Although the BofA report notes that countries suffering from housing bubble-triggered recessions usually take a while to recover, Plumer explains that “those woes are further exacerbated by structural problems with the euro zone currency union.”

“The continent’s banking system is still a mess and hurt by a lack of coherent regulation,” he writes. “Meanwhile, many nations have been enacting sharp spending cuts and tax hikes to deal with their debt troubles, dragging down growth even further.”

Couple that with record-high unemployment and languishing labor forces in countries like Spain and Greece and it's anybody's guess when investments will return to pre-recession levels.

“In the ‘central case,’ Germany, France, Italy and Spain all grow more slowly for years to come, never catching up to their pre-recession trend growth,” Plumer writes, explaining the report. “In the ‘pessimistic’ case, things get even worse, with Italy’s economy continuing to shrink through 2020.”

“In the ‘optimistic’ case, productivity and investment return more quickly, but even then, all the countries but Germany will be below their pre-recession trend growth by the end of the decade,” he adds.

In short, the EU may be doomed to years and years of painfully slow growth.

“In the absence of impetus for bold reform,” the BofA report concludes, “this exercise shows the damage will indeed be long lasting, permanently impairing growth in a context of an aging population that needs higher growth capacity than ever before.”


Follow Becket Adams (@BecketAdams) on Twitter

Featured image AP photos.

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