S&P: “The eurozone will not grow until 2014”

The eurozone economy will not grow until at least 2014, according to new forecasts by Standard & Poor’s.

The rating agency has changed its forecasts for the euro area, with a -0.8% growth in eurozone GDP expected for 2012 and flat growth in 2013.

For Spain, the forecast is now of a contraction of 1.4% next year.

This compares with projections published in July when the agency expected GDP growth of -0.7% and 0.3% for 2012 and 2013, and -0.6% for Spain in 2013.

“Recent economic indicators continue to paint a bleak picture for Europe. The data are confirming our view that the region is entering a new period of recession, after three quarters of negative or flat growth since the final quarter of 2010. But prospects continue to vary from country to country,” said Jean-Michel Six, Standard & Poor’s chief economist for Europe, the Middle East, and Africa.

In particular, the agency forecasted very weak growth in 2013 in France and the U.K., and further declines in output in Italy and Spain.

While growth in the smaller open economies of Europe such as Switzerland, Sweden, and Belgium continues to show some resilience, the recession in Italy and Spain is deepening.

Overall, the European economic outlook generally remains dominated by the deleveraging process occurring almost simultaneously in the public sector, the private sector, and the financial sector.

Meanwhile, softness in emerging markets now appears more protracted than we initially anticipated.

“The eurozone periphery hasn’t received as much interest rate relief on international capital markets from government deficit reduction as history would suggest, but the European Central Bank’s new framework may counteract that,” Six said.

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