Why recession risk may spur company action

ON EUROPE

The significant period of turmoil European equity markets have endured in recent times has left investors far less convinced this is only a cyclical pause in the global economic growth cycle.

The negative fundamentals Europe is enduring include structural and cyclical factors. On the structural side, the hangover of leverage in the developed world and the need for debt workouts by governments and households in many developed economies will keep growth in those economies low and unemployment high for the foreseeable future. This leverage overhang is evident, especially in the periphery of the eurozone, the concerns that have spread to core markets including Italy and Spain and, together with short-term funding problems, led to the sell-off in eurozone banks. Against this ne...