RPT-POLL-Euro zone strugglers face tougher 2013 than thought

Andy Bruce

(Repeats with link to graphic, no change to text)

* For data from the poll, see

* For a graphic see http://link.reuters.com/syr53t

* Economists cut 2013 outlook for euro zone strugglers

* Rising joblessness a big feature of next year

* Ireland set for return to modest economic growth

LONDON, Oct 24 (Reuters) - The euro zone's most vulnerable economies, particularly Spain, face a much tougher 2013 than thought just three months ago, marked by prolonged recession and ever-rising unemployment, a Reuters poll showed on Wednesday.

The survey adds to a growing sense that austerity is putting too great a burden on debt-stricken countries, a week after the International Monetary Fund said they should be allowed more time to cut budget deficits.

Forty-nine economists polled this week slashed their 2013 outlook for Greece and Portugal as well as Spain, which they believe faces a downturn next year three times larger than projected by the government.

On the euro zone periphery, only Ireland looks on course for a return to modest growth any time soon.

All 16 economists who answered an extra question said they agreed with the International Monetary Fund's idea of giving debt-stricken countries more time to cut their budget deficits.

Severe budget austerity measures have caused these economies to shrink far more than authorities predicted, leaving millions more people out of work. Next year promises no reversal to the trend of rising unemployment, the poll suggested.

``In that environment, I find it very difficult to see how the growth outlook is going to be that materially different next year,'' said James Nixon, chief European economist at Societe Generale.

Depression-mired Greece may have to wait until at least 2014 before its economy grows. And the survey also underlined why Spain, the euro zone's No. 4 economy, is the new focal point of the sovereign debt crisis.


After shrinking 1.6 percent this year, Spain's economy will contract another 1.5 percent next year, the poll showed - three times more than the 0.5 percent predicted by the government.

The 2013 outlook for Spain's economy has now been slashed for the last six Reuters polls.

``The current status quo is not sustainable, with the stark perception of an economic and financial crisis spiralling out of control pulling the rug from under Spanish consumers and businesses,'' said Raj Badiani, economist at IHS Global Insight.

With austerity measures worth over 60 billion euros until 2014 on their way, unemployment looks certain to head higher.

At nearly one in four, Spain already has one of the highest jobless rates in the European Union. The poll suggested that will hit 25.8 percent by the end of next year.

A majority of economists who answered an extra question - 11 out of 17 - said Madrid will apply for a full sovereign bailout, with eight stating by the end of December.

Analysts expected the deficit this year to be 7 percent of gross domestic product, higher than the government target of 6.3 percent. Similarly next year, the deficit is forecast to fall only to 5.3 percent of GDP, more than the 4.4 percent target.


Greece's depression will continue deep into 2013, the poll showed. After shrinking around 6.4 percent this year, economists expect a 3.0 percent contraction for next year - the sixth consecutive downgrade to the Greece outlook for 2012 and 2013.

Athens is struggling to strike a deal with its 'troika' of lenders - the European Commission, European Central Bank and International Monetary Fund - on a further two-year austerity package worth nearly 12 billion euros ($15.6 billion) to get its next aid tranche from its 130 billion euro bailout.

Unemployment seems set to soar, reaching 26.1 percent by the end of next year from 25.1 percent in July, which would give it the title of highest jobless rate in Europe.


Like its neighbour Spain, Portugal's economy looks set to shrink around 1.5 percent next year after a steep 3.0 percent decline this year.

Unlike Spain, however, economists largely expect Portugal will meet its deficit goals of 5 percent and 4.5 percent in 2012 and 2013 respectively.

The government has recently revised next year's outlook to a 1 percent contraction from a tiny amount of growth as it presented a draft 2013 budget with sweeping new tax hikes to meet the fiscal goals.

The new deficit goals are 5 percent and 4.5 percent in 2012 and 2013 - goals economists largely expect to be met.

``The targets seem to be credible. Portugal is obliged to reach them so if there are any shortfalls, there will be extraordinary measures to meet them,'' said Goncalo Pascoal, chief economist at Millennium bcp in Lisbon.

Like Greece and Spain, Portuguese unemployment will head higher, although not to the same heights, likely reaching around 16.4 percent by the end of 2013.


Ireland's economy should manage growth of around 1.5 percent next year, after ekeing out a 0.3 percent expansion this year.

Furthermore, it looks on track with its budget deficit targets. While austerity has hit the country's population hard, the unemployment rate should recede a little next year to around 14.2 percent, from 14.8 percent currently.

``It probably should be clear by the middle of next year that the economy is starting to turn a little bit stronger. That presumes that we don't see any more negative shocks,'' said Austin Hughes, chief economist at KBC in Dublin. ($1 = 0.7714 euros)

(Polling by Rahul Karunakar and Deepti Govind; Analysis by Rahul Karunaker; Additional reporting and polling by Andrei Khalip in Lisbon, Nigel Davies in Madrid, Conor Humphries in Dublin, George Georgiopoulos in Athens)