Eurozone's South still poses an enormous risk

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Growth in the global economy could accelerate to 3.4 percent in 2017 but the outlook is clouded by political risks, Morgan Stanley has warned. The investment bank warned uncertainty regarding a new administration in the U.S., the start of Brexit negotiations and key elections across Europe could undermine global growth. "With the Italian referendum, the French presidential election and the German general election, we are essentially attempting a political triple jump in Europe," Elga Bartsch, global co-head of economics at Morgan Stanley, said on Monday.

Europe could be on the brink of a 'political triple jump', Morgan Stanley warns

Italy is failing to reduce its heavy debt burden and the structural part of its overall deficit has been rising since 2014, rather than falling by the 0.5% of GDP each year that the EU authorities ostensibly require until a country balances its books in structural terms. Italy has attributed its poor deficit performance this year to extraordinary spending on migration and post-earthquake reconstruction, though other ongoing structural features such as a weak banking sector and poorer-than-expected growth have also contributed, with our Consensus Forecast putting GDP growth at only 0.8% both this year and next. Ultra-low inflation has also hindered Italy’s debt reduction efforts.

Debt & Deficit Outlooks for France, Italy, Spain, & Portugal | Wolf Street