Between a rock and a hard place

- "The euro area posted strong growth in Q2, but there are signs that the slowdown in the US and Asia is now beginning to be a drag on euro area growth. We project a slowdown with growth just below trend in the coming quarter."
- "Internal demand has started to gain strength, which makes the recovery less dependent on the pull from export markets. However, the recovery is not fully sustainable until we see declining unemployment and a stronger recovery in private consumption."
- "The unemployment rate has been stable at 10.0% since March. We project that unemployment will begin to decline soon albeit slowly, but this result is very sensitive to developments in labour-intensive sectors, such as construction."
- "The southern European debt crisis is not all over. Lower growth and higher spreads make a harmful cocktail. Targets are still achievable, but depend on reform willingness. Our primary concern is that public support for necessary reforms may falter."
- "The ECB is taking a pause on the exit path. The risk of an economic downturn has increased and the monetary analysis, which shows that loan flows have turned softer in recent months, does not support a more hawkish stance. We expect a first ECB hike in Q4 2011."

DenDanske Research Euroland 20100914

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