Chris Rice: Caution needed as Europe faces 'weak' recovery

ON EUROPE

Europe faces considerable challenges on the path to economic recovery. Greece faces significant deficit and cashflow problems.

A poor record of raising taxes makes the need to cut spending particularly pressing. Spain faces its own problems following the bursting of its housing bubble. Countries with their own currency, such as the UK and the US, can probably defer such tightening for another year or so but ultimately face a similar era of austerity. Beyond Europe, the effect of China’s imbalanced growth remains a concern. Last year more than 90% of China’s growth came from fixed asset investment, while consumption as a proportion of GDP has fallen over the last decade. To shift the economy from one that exports...