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Peter Voser warns of slower economy or even ‘slight’ recession

European CEOs Prepare for Recession Risk Amid Greek Flipflopping

November 04, 2011, 4:53 AM EDT

By Tara Patel and Matthew Campbell

Nov. 4 (Bloomberg) — The squabbling over Greece’s future in the euro zone may push Europe’s economy into recession and reduce companies’ ability to compete internationally, according to executives of some of the region’s biggest corporations.

“There are legitimate reasons to be worried,” Alexey Mordashov, CEO of Russia’s second-biggest steelmaker OAO Severstal, said yesterday in an interview in Cannes, France, where the Group of 20 leaders are meeting this week. “We expect it to undermine growth in Europe.”

Europe’s financial crisis deepened yesterday as the European Central Bank unexpectedly lowered interest rates and President Mario Draghi said the region is heading toward a mild recession. Political leaders raised the prospect of the euro area splintering as Greece’s government veered on collapse. Business leaders held a parallel summit in the French southern resort city on competitiveness and economic growth that was dominated by questions on Greece and the future of the euro.

“We would have to prepare for a slower economy and maybe even a slight recession in Europe,” Peter Voser, CEO of Royal Dutch Shell Plc, Europe’s largest oil company, said in an interview in Cannes. “We need a fast solution and then we deal with the consequences. From a business perspective, if this goes on too long, so much uncertainty, investment will be delayed.”

‘Unsettling’

Bayerische Motoren Werke AG is already planning for slower economic growth next year and possibly a recession which may lead the world’s largest maker of luxury vehicles to reduce production, Chief Financial Officer Friedrich Eichiner said on an earnings conference call yesterday.

Growth has slowed for high-end carmakers from a record pace in the first half as Europe’s debt crisis unsettles consumers. Daimler AG, maker of Mercedes-Benz, last month reported its first earnings decline since the third quarter of 2009, burdened by expenses for new models.

“The problem that we see is that the debt crisis risks unsettling consumers, and unconfident consumers don’t buy premium cars,” Eichiner said. “We are already seeing signs of weakness in southern Europe.”

The euro tumbled after the ECB cut its benchmark interest rate yesterday and erased losses after Greek Prime Minister George Papandreou signaled he won’t call a referendum on the rescue plan. Volatility in the currency market may cause banks to cut loans for developers, Vestas Wind Systems A/S CEO Ditlev Engel said Nov. 2. Vestas is the world’s biggest maker of wind turbines.

Forecasts Cut

“We are now investing about 15 percent in Europe of the total of $30 billion overall which is much lower historically,” Shell’s Voser said. “The competitiveness of the European economy is suffering and that has consequences in the medium and long term in terms of investment levels.”

The Organization for Economic Cooperation and Development on Oct. 31 lowered its growth forecast for the euro area, saying it will grow 1.6 percent in 2011, slowing to 0.3 percent in 2012.

As Group of 20 leaders began their talks in Cannes, their focus was on Athens where Papandreou was clinging to power after abandoning a referendum that would have triggered a suspension of European aid. Amid concern Italy may be the next domino to fall as its bond yields jumped to an euro-era record, Prime Minister Silvio Berlusconi was pushed by Germany and France to accelerate an austerity drive.

“We see a certain lack of competitiveness, lack of productivity in European countries,” said Mordashov, Russia’s second-richest man with an estimated fortune of $18.5 billion. “We see a much stronger situation in some other countries and this is what needs to be resolved.”

–With assistance from Maryam Nemazee and Nicholas Comfort in Cannes, France, and Chris Reiter in Berlin. Editors: Kenneth Wong,

To contact the reporters on this story: Tara Patel in Cannes, France via [email protected] Matthew Campbell in Cannes, France via [email protected]

To contact the editors responsible for this story: Will Kennedy at [email protected] Jacqueline Simmons at [email protected];

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