EU Economics

Eurozone WILL shrink and collapse: Shock report reveals what business leaders REALLY think

MORE than half of European business leaders expect the eurozone to shrink or collapse in coming years, according to a new report.

Most companies want “more of Europe” but “are still doubting, even fearing, the eurozone’s durability in its current form”, analysts at the McKinsey Global Institute said.And this may limit economic recovery through the region, they said.

Researchers questioned 2,000 executives across Britain, France, Germany, Italy, Poland and Spain, finding leaders reported a wide range of risks and uncertainties.

EurozoneGETTY               A survey found more than half of executives expect the eurozone to shrink or disband

EurozoneGETTY               Fears of instability are stopping businesses from investing

Concerns around the future European Union crises, nervousness about rising populism and anti-globalisation sentiment and lingering fears about the future shape and direction of the EU itself, were widely reported, according to Lead author Jacques Bughin.He said: “We delved more deeply into attitudes toward the EU, asking about the benefits companies had experienced in the past, as well as their hopes and expectations for Europe in the future.

“These are complicated times for the EU, which has had to contend with growing political and economic divergence, including the decision by the United Kingdom to withdraw altogether.

“Overall, the response to our questions on the EU was positive. Just over half the companies surveyed think the EU has had a beneficial effect on their business, and the most successful companies are the most positive.

eurozoneGETTY            Le Defence financial district in Paris

Fifty-one per cent expect the eurozone to shrink or disband in the years ahead

Jacques Bughin

“Moreover, some 60 per cent of business respondents say they want “more Europe” in the form of greater policy convergence and integration.“The answers nonetheless highlight a gap between the future EU that business wants and the scenarios it expects.

“Almost 85 per cent of surveyed companies say they think the EU will remain intact and just under half anticipate that the status quo will prevail or that greater integration will take place.

“But 51 per cent expect the eurozone to shrink or disband in the years ahead.”

eurozoneGETTY                       The European Central Bank in Frankfurt

The survey indicated a continuing reluctance among European firms to invest, with many hoarding cash against an uncertain future.Gross corporate savings rose to almost £2 trillion in 2015, and companies are divided between those saying they are saving to fund future investments (48 per cent) and those building reserves for future crises (47 per cent).

But most businesses believe they already invest at the right level and see sufficient opportunity to invest more with weak demand, lack of opportunities and access to finance no longer featuring highly as barriers to investment.

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