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Eurozone economy becalmed: economist
Last Updated: 2014-03-15 08:48 | Xinhua
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The current rates of inflation, unemployment and the rate of growth in the eurozone look set to prevail for the next couple of years, according to an economist.

James Ashley, chief European economist with RBC Capital Markets, said "Europe is slowly heading in the right direction. Growth of about 1 percent of GDP per annum, and inflation of about 1 percent or slightly above, is probably going to prevail this year and next year."

"I am not now going to say we are going to see improvement because we are in a kind of 'steady state'. The current rate of growth, the current rate of inflation, the current rate of unemployment are likely to prevail in the euro area for the next couple of years," said Ashley

However, Ashley was fairly upbeat, "We are not going back into recession. We are going to see a process of deleveraging and re-balancing in the euro area, but while those processes are ongoing I think the current outlook is about as good as it gets."

Ashley said that a year ago it looked like the eurozone situation would slowly improve, and it has done so, he said.

Unemployment in the 18-nation eurozone was at 19.175 million or 12 percent in January 2014, for the fourth month running.

Inflation remained steady at 0.8 percent in February, the same as in the previous two months, and slightly down on November's 0.9 percent reading.

Inflation has headed down from 2 percent in January 2013, the low level has sparked worries among some commentators who fear deflation taking hold.

Low inflation poses a significant problem for the European Central Bank (ECB), whose target is 2 percent.

Low inflation is partly an indicator of underlying weakness in the economy, also reflected in the high unemployment figures, and it will take time for these structural problems to be addressed and resolved.

Ashley said, "We have a reasonably optimistic view; the macro headwinds are diminishing, with structural reform, fiscal reforms, and the tail risks have diminished."

However, Ashley warned there was "still a lot of fragility in the euro area" and the ECB had little room for creative solutions.

Ashley said, "The ECB is hampered because there is little leeway for further stimulus. The threshold for Quantitative Easing is extremely high, and if that is not used there are not too many options which can be applied."

The ECB left its bank rate at the historical low of 0.75 percent at the beginning of March, despite calls for a further cut to stimulate the eurozone economy into activity.

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