Europe meltdown, global slump seen next year:Poll

Written by Bloomberg | Updated: Sep 30 2011, 08:26am hrs
Global investors anticipate Europes debt crisis leading to an economic slump, a financial meltdown and social unrest in the next year with 72% predicting a country abandoning the euro as a shared currency within five years, a Bloomberg survey found.

About three-quarters of those questioned this week said the euro-area economy will fall into recession during the next 12 months and 53% said turmoil will worsen in a banking sector laden with government bonds, according to the quarterly Global Poll of 1,031 investors, analysts and traders who are Bloomberg subscribers. 40% see the 17-nation currency bloc losing at least one member in the next year.

More than a third of participants say deteriorating European debt will derail the world economy over the next year, with the pessimism highlighting the pressure European policy makers face as they try again to fix their 18-month sovereign crisis. Stocks last week tumbled into their first bear market in two years and foreign leaders, including President Barack Obama, are urging European leaders to intensify their rescue efforts.

Its a bad crisis, said Jean-Yves Chereau, a poll respondent and chief investment officer at Halkin Investments in London. Since the resurgence of troubles in Greece, you suddenly have a crisis of confidence and trust and thats impacting markets and could hurt economies. Politicians need to move ahead pretty quickly.

Europes woes have reignited as Greece attempts to stave off default and spars with its European Union partners over whether it deserves the next tranche of aid next month. Euro-area lawmakers are also taking their time implementing a July overhaul of their rescue fund to give it more crisis-fighting tools, while investors question the ability of banks to withstand further market unrest as signs also mount that the economy is losing momentum.

China growth seen below 5% by 16

Most global investors predict Chinese growth will slow to less than half the pace sustained since the government began dismantling Mao Zedongs communist economy three decades ago, the quarterly Bloomberg Global Poll of investors showed. 59% of respondents said China s GDP, which rose 9.5% last quarter, will gain less than 5% annually by 2016. 12% see such a slowdown within a year, and 47% said it will occur in two to five years, the survey showed. China, which saw its exports tumble the most since at least 1979 amid the 2008-09 global crisis, may not be able to rely on trade in any prolonged demand slump in Europe and the US, now battling to avoid returning to a recession.