low interest rates. there is some evidence that a significant proportion of this money has gone in to purchasing sovereign debt, but it is still too early to say how much will go to lending to households and businesses. the credit crunch is likely to reinforce the negative growth outlook for the region, and will in turn have its own negative feedback loop. the euro area is expected to contract by around 0, 5 per cent this year, and the european commission expects negative growth in 8 of the 17 eurozone countries this year. these countries include belgium, greece, spain, italy, holland, austria and portugal. widespread fiscal consolidation, even in countries with relatively strong fiscal positions such as germany, has contributed to the negative growth outlook. a number of countries, such as spain, portugal and ireland are attempting to reduce their deficit to gdp ratios by around 3 per cent per year for the next two years, and italy by about 2 per cent per year. the negative growth outlook raises doubts about the ability of the greek economy to adjust to the fiscal austerity that is being imposed on it. the economy has contracted by about 15 per cent in the past two years, and is expected to contract by a further 4, 4 per cent this year, while unemployment has increased from 7, 7 per cent in 2008 to almost 20 per cent. at the root of these problems is a balance of payments crisis within the euro area between northern and southern europe. the loss of competitiveness experienced by the southern european countries and their consequent balance of payments deficits has in effect been financed by borrowing from the northern europeans. this is not sustainable indefinitely. under normal circumstances the adjustment would be facilitated through exchange rate depreciation, but with this option ruled out, a more difficult path of “ internal devaluation ”, involving absolute reductions in wages and expenditure, has to be followed. the more reluctant the surplus countries are to increase their consumption of southern european goods, the more difficult the adjustment becomes and the more politically unpopular these measures become in the deficit countries. apart from the european situation, prospects for other parts of the global economy appear to be more promising, but risks remain. the us economic growth has surprised on the upside in recent months, but fears remain that this nascent recovery could be short - lived. in particular, there are risks that political conflicts over fiscal policy ahead of the november elections could result in premature fiscal cutbacks, which, according to some estimates could have the potential to reduce us growth by up

to two percentage points. there are also indications that the chinese economy may be slowing, but the chinese authorities have the ability and resolve to intervene strongly to prevent a so - called hard landing. one region with a more favourable outlook is sub - saharan africa, which is expected to grow by around 5, 5 per cent this year. south africa ’ s financial and trade links with africa have been increasing in recent years, and the continent is fast becoming the major bis central bankers ’ speeches destination for our manufactured exports. during the financial crisis, africa was relatively protected from the fall - out, given the predominance of intra - regional trade, and south africa would do well to encourage further two - way trade and investment with the region. one of the consequences of the global crisis has been the severe social dislocation that has accompanied it, and it is questionable how long such pain can be endured. the recent protests on the streets of athens and general popular opposition raises questions as to whether or not the latest initiatives are politically sustainable. history is replete with examples of how circumstances similar to those described lead to political polarisation and the rise of nationalism and / or populism. this is happening in the context of a divided europe, with no consensus on the appropriate solutions to the problems, and irresolute leadership reflected in weak and tenuous coalition governments. the social problems are reflected in the spiraling of unemployment in some of the advanced economies. this is particularly the case when it comes to youth unemployment. in this respect south africa is no longer unique, with its estimated unemployment rate of 23, 9 per cent, and youth unemployment at around 50 per cent. the negative trends in europe in particular are quite dramatic. in the beginning of 2008 the unemployment rate in the european union was 6, 9 per cent and the unemployment rate amongst the youth ( i. e. persons below 25 years of age ) was 15, 9 per cent. in january 2012 the unemployment rate in the eu was 10, 7 per cent, while youth unemployment measured 22, 4 per cent. the number of unemployed youth totaled 5, 5 million. there are some stark divergences within the region, with overall unemployment ranging from 4, 0 per cent in austria, to 23, 3 per cent in spain, and youth unemployment ranging from 7, 8 per cent in germany to 48, 1 per cent in greece and 49, 9 per cent in spain. as a rule of thumb, the youth unemployment rate is