Tomorrow marks d-day (decision day) for how the next 12 months will play out economically when European leaders meet at the critical Euro Summit in Brussels.
It is without a shadow of a doubt that last month’s poor PMI figure and the less than encouraging EEF forecasts for 2012 have been influenced by the eurozone sovereign debt dilemma.
And while we wait with baited breath for a resolution from Friday’s meeting, the 17 eurozone central banks and the US Federal Reserve are considering riding in on a green-back stallion to help strengthen the International Monetary Fund in its attempt to help debt-striken European countries.
If an agreement is reached, according to German daily newspaper Die Welt, the Fed-backed group would play more than $100bn into a special fund which would then finance programmes for countries in crisis. But is throwing more money at this problem a sensible solution? Are threse stagnating economies capable of trading their way out of even more debt in the near future or will it simply dig a bigger hole? And how will these countries react not only to the designated austerity measures but also the rather embarassing conditions that will undoubtedly be attached to the debt relief which will effectively remove sovereign decision making power?
While markets fluctuate in their impractical and speculative manner, UK Business Secretary Vince Cable has tried to restore a certain element of assurance saying he is “pretty confident” that the eurozone can resolve its immediate problems. Anecdotally, despite this uncertainty, manufacturers we have met at dinners and events throughout the UK over the last couple of months have, by and large, continued to express solidarity and told of continued growth and success.
This confidence is however at odds with Standard and Poor’s threat to downgrade the credit rating of 15 (including France and Germany) of the 17 nations that make up the eurozone and the fact that US Treasury Secretary Timothy Geithner has specifically travelled to Europe to maintain pressure on European leaders ahead of Friday’s summit. Despite Cable’s conviction, there is clearly an incredible amount of uncertainty in the global market but hopefully in the next 72 hours we will have a better picture of where the economy is heading and what UK manufacturers can expect in 2012.