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ECB says euro zone will avoid recession but company earnings dip again

By Hugh Wilson

Central bank’s chief economist says recovery will happen ‘in a year or two’

The euro zone economy is growing more slowly than expected but will not slide into recession, according to the European Central Bank (ECB).

ECB chief economist Philip Lane told Italian daily la Repubblica that while the “economy is growing less quickly than we hoped” the bank expected a recovery “in the next year or two”.

“There’s no doubt that, compared with 2017, there’s been a sustained slowdown, but in the euro area we don’t see a major recession,” Lane said.

Lane also used the interview to press euro zone economies to take advantage of current low interest rates. Countries should use the period to reduce debts rather than “waste the additional resources for new expenses or cuts to taxes,” he said.

On Monday November 18 Lane told the Fortune Global Forum in Paris that firms are in better financial shape because of low interest rates and access to cheaper capital. European corporations had begun to increase capital expenditure as a result, he said.

A longer-term challenge for the euro zone was climate change, which the ECB was already taking into account when considering future monetary policy. Reducing pollution would be a “dominant driver” of business investment, Lane said.

But in a blow to hopes for an early euro zone recovery, companies on the Stoxx 600 index were expected to collectively record a fall in earnings of 4.7 per cent for the third quarter of 2019, according to I/B/E/S Refinitiv data. The current earnings season could be the worst quarterly performance since Q3 2016, Reuters reports.

FURTHER READING: Europe’s factories sputtering at seven-year low

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