The UK can look forward to economic recovery if current trends continue but the eurozone will break up, a leading economist has told the Institute of Travel and Tourism.
Professor Graeme Leach, chief economist and policy director at the Institute of Directors, told the ITT conference: “One tail wind has begun to pick up and that is the overall amount of money in the UK economy.
“The more it picks up the more we can be sure recovery will be sustained.”
Leach said: “There is a real squeeze on household income. But at last the money supply is growing. So long as it grows we will have a recovery.
“That is the measure the Bank of England has been targeting. If we had not had quantitative easing [by the Bank] we would have had deflation.”
He insisted: “I remain bullish.” But Leach warned: “The euro crisis is still there and remains the key problem.
“The ‘Club Med’ economies have lost 30%-40% of their competitiveness against north European economies and can only regain that by internal devaluation – wage cuts of 30%-40%.”
He told the ITT this was not feasible and countries would fall out of the eurozone.
“The euro crisis is a fundamental strategic challenge,” he said. “We are not at the end or even the beginning of the end.
“Politicians tell us they can keep the euro together but they are wrong. The question is how does it break up?”
Leach forecast “continued turmoil for the next few years”, but said: “At the end point we will be a lot better off.”