EU to mull impact of market rout

Brussels, March 25:

EU finance ministers are to take stock of Europe’s economic outlook on Monday and Tuesday for the first time since a major financial market rout rattled investor confidence worldwide.

The ministers, meeting in Brussels, are also due to back separate plans to harmonise payments rules across the 27-nation bloc and ease restrictions on cross-border banking mergers.

The EU’s finance chiefs have not had a huddle since global stock markets took a beating at the end of February after a nine-per cent dive in Chinese stocks and amid growing concerns about the health of the US economy.

Although the European economy was not the source of the jitters, concerns arose in the wake of the market turbulence that it could suffer knock-on effects from a slowdown elsewhere, especially in the United States.

In a study prepared for the ministers, the EC said “the recent turbulence in global equity markets was too limited to have impacted significantly on the aggregate euro area or EU economic performance.” The market rout triggered a rise in the value of the Japanese yen against the euro, something the eurozone ministers had previously been calling for but with little result.

EU’s executive arm is forecasting that combined economy of the 13 nations sharing the euro will slow to 2.4 per cent growth from 2.6 per cent last year.

The risks to that forecast have included the impact of rising interest rates, an oil price spike and a surge in euro, but the growing prospect of a significant slowdown in US has cast a new cloud over the outlook.