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ECB: Eurozone to Contract in 2013

Posts by Ian Wyatt

There appears to be no letup in this European debt crisis.

The European Central Bank just slashed its 2013 economic forecast for the debt-ridden eurozone. Instead of growing by half a percent next year, the ECB now expects the eurozone’s GDP to contract 0.3%. Mario Draghi said that a “gradual recovery” won’t start until late in the year.

That’s not a pleasant forecast for investors looking for bits of good economic news amid all this fiscal cliff muck.

For months, U.S. markets have been ruled by election uncertainty and now fiscal-cliff fear. With the exception of a few days, European debt concerns have mostly been pushed to the backburner. Yet there is clearly plenty of reason for concern.

So even when (if?) the fiscal cliff is avoided and order is restored – relatively, at least – to the U.S. economy, Europe may again become a focal point of investors like it was in 2011. And that wasn’t a good thing – stocks were basically flat last year.

So while it seems like the fiscal cliff is all that’s standing in the way of a huge market rally, don’t be so sure.

Don’t forget about Europe.