Eurozone recession to deepen - Goldmans

Eurozone recession to deepen - Goldmans

Published: January 5, 2012

Pressures should lead to “a more concrete policy agreement”, say analysts.

Analysts at investment bank Goldman Sachs expect pressures in Europe’s financial markets to remain “intense” in the coming months and for a Eurozone recession to deepen early in the year.

“Our central case is that this will ultimately result in a more concrete policy agreement, exchanging new fiscal rules for some risk-sharing on existing sovereign debt from both governments and the [European Central Bank],” analysts write in a research note published today (Thursday). “But we can easily envisage a bumpier road.”

The bank’s analysts add that recent events such as the European Central Bank (ECB) injecting funds into the banking system have done little to change their views. “We have always expected… that the ECB would do what was required to prevent a major funding breakdown (and we think they will continue to do so),” they write.

“The larger issues continue to centre on how to settle the sovereign funding situation and to reverse the cyclical weakness in the periphery. On that front, the story remains largely the same.”