UK and Euro zone Economic Concerns

The Euro and pound Sterling have both suffered surprising setbacks after their recent partial economic recoveries, which has subsequently provided evidence supporting the fact that the economic crisis is far from over and warranting continued caution in the uncertain economic market.

In particular, the Euro’s annual rate of inflation turned negative for the first time in its nine year history after prices fell 0.1%.  Analysts argue that prices have been affected by lower costs of food and energy and also as a result of reduced consumer spending.

At this moment in time, many European financial analysts have grave concerns about the health of the Euro stating that this may be the start of a period of deflation.  If deflation does occur, then economic output and consumer spending will continue to drop, thus perpetuating the current recession.

With many economists now believing that this is just the start of a downward trend, the European central bank has been quick to deny such claims, stating that the recent price drops are as the direct result of falling oil prices, and that they are only temporary.

Whilst the Euro suffers from the initial onset of deflation, the UK economy has recently contracted a great deal more than expected.  This marks this year, as the countries biggest ever year of decline since the end of World War II.  Initial revisions about the extent of the financial crisis have come as a real shock to economic analysts and financial institutions.

The expectations are that the second financial quarter of 2009 will be flat, and that people should look forward to seeing slow and measured growth according to experts from the National Institute for Economic and Social Research.  It would seem that the UK Sterling finally has hit rock bottom.

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