Grim Year Ahead

2 Jan 2012 - It is only the second day of the year, but the optimistic feelings linked to new beginnings are already fading.  European leaders have warned of a difficult year ahead, as many economists predict recession in 2012. German Chancellor Angela Merkel said Europe was experiencing its "most severe test in decades" but that Europe was growing closer in the debt crisis. France's President Sarkozy said the crisis was not finished, while Italy's president called for more sacrifices. Growth in Europe has stalled as the debt crisis has forced governments to slash spending.No doubt, these trends will also have a negative impact on growth in Asia and elsewhere. The leaders' new year messages came as leading economists polled by the BBC said they expected a return to recession. The cost of borrowing for some of the eurozone's largest economies, including Italy and Spain, has shot up in recent months as lenders fear governments will not be able to pay back money they have already borrowed. With growth stalled, the pressure is on governments across Europe, not just ones using the single currency, to cut spending in order to meet debt obligations. Fears are now focusing on a potential second credit crunch, triggered by the exposure of banks across Europe to Italy's huge debt. So once more, Happy New Year?