European recovery will be 'slow or slower', says S&P

Europe faces a two-speed recovery, according to the leading credit analyst Standard & Poor's. The ratings agency warned yesterday that neither speed will be anything faster than "unhurried" – but France and Germany will continue to distance themselves from recession more rapidly as the likes of Greece and Spain stagnate for much longer.

"We think the upcycle will likely continue in the coming nine months in Germany, France, Austria, the Netherlands and – trailing – in the UK," said Jean-Michel Six, Standard & Poor's chief economist in Europe. "The positive knock-on effect of the euro's recent slippage against the dollar, if it persists, could even pad eurozone GDP growth by about one percentage point over a full year, by our estimates."

Confirming fears that the eurozone financial crisis could tip Europe into a "double dip" recession, the agency added: "In our view, the recent tide of uncertainty surrounding sovereign creditworthiness that has shaken international capital markets since February is likely to carry considerable consequences for Europe's prospective growth.

"We foresee a wider than previously anticipated gap between Europe's southern rim countries and their northern neighbours. Financial market pressures have intensified, just as countries like Greece, Spain, and Portugal have moved to fast-track implementation of contractionary fiscal policies."

S&P predicted the Bank of England would keep its base rate on hold at 0.5 per cent at least until the first quarter of next year, and forecast UK growth of 1.2 per cent in 2010.