Recovery stalls in Europe as austerity grinds on

Growth wilted across large swathes of the eurozone in the first quarter, dashing hopes of durable recovery and prompting demands for shock and awe action from the European Central Bank.

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Bourses tumbled across Europe, with Milan’s MIB index down 3.6pc, led by a plunge in bank stocks. Madrid’s IBEX was off 2.35pc and France’s CAC fell 1.25pc.

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Prof Charles Wyplosz, from Geneva University, said the relapse should not be a surprise. “Austerity has been reduced but it has not stopped. Countries are still being told to reduce their deficits and they should not be doing that right now,” he said.

Top economists warn Germany that EMU crisis as dangerous as ever

Council on Foreign Relations compares Germany’s hardline stance with US policy towards Britain at the end of the Second World War

The eurozone debt crisis is deepening and threatens to re-erupt on a larger scale when the liquidity cycle turns, a leading panel of economists warned in a clash of views with German officials in Berlin.

“Debts above 130pc of GDP for Italy and 170pc for Greece are a recipe for disaster once we go into the next downturn,” said Professor Charles Wyplosz, from Geneva University.

“Today’s politicians believe the crisis is over and don’t want to hear any more about it, but they have not tackled the core issues of fiscal union and public debt,” he said, speaking at Euromoney’s annual Germany conference.