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Worldcrunch

Bad Or Worse? Gauging Europe's Economic Prospects For 2012

Analysis: Looking ahead to the next 12 months, European business leaders are hoping the current economic slowdown will be more manageable than the crisis four years ago. Fear of a worst-case scenario, however, is part of everyone's calculation.

Article illustrative image Partner logo A Ptroplus refinery in Petit-Couronne, France


LES ÉCHOS/Worldcrunch

PARIS – The year 2012 has just begun with one grim question: is it going to be "just" a tough year...or an awful one?

On paper, businesses have much to worry about. France has already entered a recession, the rest of the world seems to be slowing down, the euro zone is on the verge of imploding, and the multiplicity of elections taking place in 2012 is likely to paralyze public action in several countries. Seldom have the drivers of businesses had to find their way in so thick a fog: visibility is almost nil, obstacles are everywhere and a collision is bound to occur. In the end, the only unknown variable is the violence of the inevitable accident.

Companies are cautiously gearing up for the crash. For several months now, they have opted for a freeze on hiring, delayed investments, and put major acquisition projects on hold. Companies are now sporting their "crisis management" cap. But like a self-fulfilling prophecy, this cautiousness from our captains of capitalism may well have a morose impact on an already grim situation.

Still, it looks like companies are actually better equipped to face the storm today than in they were in 2008. First, because they have anticipated it and are therefore able to reduce their inventories. But there is also the hope this time that the economic machine is simply slowing down, rather than about to jerk to a sudden stop.

Don't look for state help

Let's be clear: not all groups are going to come out of 2012 unscathed. The current situation of Petroplus, Europe's largest independent oil refiner, shows it: those who step into this economic crisis without having overcome their structural problems will be the first victims. And unlike previous crises, CEOs must be aware that politicians will not be able to help them much this time.

In 2008, faced with a sharp economic downturn and the disruption of banking and financial markets, European governments played their part as economic firefighters. But today, the firefighters themselves are in debt, naked and vulnerable. What companies fear is not only that governments are not able to finance potential measures to relaunch the economy, but that the European states in particular are unable to extinguish the monetary fire still that is still burning.

In 2008, companies had to face failing money markets; let’s hope that in 2012 they won't have to deal with the disappearance of a currency. Many would not be able to survive the blow.

Read the original article in French

Photo – zigazou76

 

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About this article source Website: http://www.lesechos.fr/

France's top business daily, Les Echos covers domestic and international economic, financial and markets news. Founded in 1908, the newspaper has been the property of French luxury good conglomerate LVMH (Moet Hennessy - Louis Vuitton) since 2007.

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