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S&P warns that euro zone isn't out of the woods yet — economy to contract further in 2013, and "formidable" challenges await.
Changes in 2013 "could mark the start of the region sustainably overcoming the market volatility and fragmentation that has affected it over the past few years," the agency declared.
It remains too early to pop the good champagne, however — S&P also noted that "formidable" challenges lie ahead.
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S&P expects the euro zone economy to continue to contract in 2013, with a "mild" recovery by the time 2014 rolls around. The agency found "some signs of stabilization emerged in the latter half of 2012."
The agency noted that any recovery will be contingent on member states continuing to work toward rebuilding their economies, by stabilizing public debt and paying down external deficits.
Further, S&P warned that member states suffering from a worrying lack of cohesion — such as Greece — may be forced to implement new "safeguards to the social contract" if they wish to see an economic recovery.
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The S&P called these suggestions "challenging but achievable." But implementation risks remain the reason why the agency's outlook on euro zone sovereign ratings remain decidedly negative, the agency added.
It's been a rough week for euro zone economies, after a recent Eurostat report found that a whopping 11.8 percent of the population was unemployed — a new record.
The stats are even worse for youth, who face 24.4 percent unemployment in euro zone countries, with a staggering 57 percent rate of youth joblessness reported in Spain.
According to S&P, 12 out of 17 euro zone nations have seen their credit rating downgraded in the wake of the crisis.