- ECB The beneficial effects from the ECB’s announcement are fading
- Still, the biggest risk weighing on global growth is American
Admittedly, we cannot rule out another stressful episode in the eurozone debt crisis. However, this risk has dropped, mainly thanks to the ECB. With calm (almost) back on European markets, the focus is back on the US. The fiscal cliff, if not duly resolved, would lead to drastic cuts in spending and marked increases in taxes, amounting to 5% of GDP, way enough to plunge the economy back into recession. With high level of uncertainty regarding the future fiscal environment, the business sector postpones investment and hiring: the fiscal cliff is weighing on GDP growth already. This was obvious this week, with a terrible durable goods report for August, highlighting an accelerating pace of decline in new orders for capital goods.