The Year Ahead: World: Weak Recovery in Euro Zone Leaves a Lot to Be Desired
BERLIN -- The euro zone's recovery from crisis looks stuck in low gear, posing risks to its struggling members and weighing on fragile global growth.</br></br>The world economy's most-troubled region in recent years is likely to grow at least a little in the coming year, extending a recovery that began last summer. But the slow pace could become a trap. Expected growth of about 1% is too little to bring down mass joblessness, which is testing social and political cohesion in weaker countries.</br></br>Stubbornly low inflation of about 1% or less is also too low for comfort, because it's pushing weaker countries close to deflation and making it harder to bring down their debts.</br></br>"We do have a recovery, of that we can be confident," says Julian Callow, chief international economist at Barclays in London. "But the task is to nurture it, because it's not strong enough to make a significant impact on unemployment, which is the primary source of the disinflation."</br></br>The European Central Bank is the actor with the tools to do something about below-target inflation and falling bank lending. But the question, say economists, is whether the ECB is willing to experiment with unorthodox measures such as money-printing or negative interest rates, which would cause anger in Germany, the biggest member. Germans generally don't like central-bank activism and their relatively healthy economy doesn't need it.