Recession in Europe is gaining momentum

The volume of retail sales in the euro area countries fell in October more than experts expected – by 0.8% compared with September by 2.1% year on year. And this despite the fact that the level of consumer optimism is at the lowest level in 15 years. At the same time, the index reflecting the activity of the services sector in the euro area collapsed to its lowest level in 10 years. These indicators are crucial: domestic demand is provided by two three European economies.

The numbers prove once again: the economic recession, which began in the euro area in the third quarter, only deepened in the fourth. The European Central Bank, in fact, has no choice: at a meeting on Thursday, the department of Jean-Claude Trichet will have to drastically reduce base rates on loans to facilitate access to money for banks, and ultimately, businesses and consumers. The question is how much to reduce rates from the current 3.25% – by 0.5% or 0.75% at once. Moreover, inflation is no longer a hindrance – in the euro area amid falling business activity, consumer price growth has slowed.

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