Hostility to EU may grow unless recovery spreads

Ratings agency Standard & Poor’s are warning that the backlash against the European project could grow unless the economic recovery is felt by the people on the ground.

In an assessment of the recovery of the eurozone entitled, The Long Haul: Eurozone Deleveraging Could Stunt Growth For Years, the ratings agency predicted that it could take years for the eurozone peripheral nations to deleverage — which will continue to dampen their economic performance.

Standard & Poor’s chief sovereign rating officer Moritz Kraemer said that unless the tough actions taken by governments begin to bear fruit, they risk fuelling a further radicalisation of voters.

“We have observed rising public discontent, most recently evidenced by many voters opting for eurosceptic parties in the May 2014 European parliamentary elections.”

Mr Kraemer is not confident that the austere action taken by the peripheral governments in Ireland, Spain, Greece and Portugal, will deliver rampant growth.

He said that the stubbornly high level of public-sector debt means that the fragile recovery in the eurozone is likely to remain subdued.

Mr Kraemer said that the high levels of debt were often taken on by the peripheral countries in order to protect their citizens from the worst aspects of the recession.

The report states that in the peripheral countries and Slovenia, debt as a share of GDP increased by an average 106 percentage points of GDP between early 2006 and a peak in 2013. Since then, the ratio has decreased by only 3 percentage points of GDP.

Ireland has outperformed the other countries in deleveraging, with the corporate sector debt-to- GDP ratio down 14 percentage points from the peak, and households almost 24 percentage points.&

Even with Ireland’s improved deleveraging, the country will still have the overall highest private leverage ratios, along with Portugal in 2020.