INVESTORS will gauge the strength of the eurozone’s fragile economy this week as escalating conflicts in Ukraine and Iraq darken the mood globally.

    In stark contrast to the United States and Britain, which are growing strongly, economic output in the euro bloc is likely to have all but ground to a halt in the three months to June. Its star economy, Germany, is losing momentum and Italy is sliding back into recession.

    “The United States and the United Kingdom are going to be among the fastest-growing economies both this year and next,” said James Knightley, an economist with ING. “In Europe, the situation seems to be going into reverse.”

    On Thursday, the European Union will announce economic output data for the 18 countries in the eurozone for the April-June quarter, and Germany will reveal its own gross domestic product for the same period.

    By these yardsticks, neither Germany nor the wider eurozone are expected to see much, if any, improvement on the first three months of the year.

    To compound matters, tit-for-tat sanctions between Moscow and the European Union and fears that Russia could even send troops to eastern Ukraine are already sapping business confidence and will eat into paltry economic growth later this year.

    Not only does Moscow supply about a third of the European Union’s gas needs, trade ties in other areas between Russia and Europe run deep.

    German energy giant E.ON, for instance, has invested 6 billion euros (US$8 billion) since 2007 in Russia, while chemicals firm BASF has a joint venture with Gazprom.

    “For a long time, the market has been ignoring the geopolitical risks,” said Gregor Eder, an economist with Allianz, one of the globe’s largest fund investors.

    “The escalation in Ukraine and a spiral of sanctions could be a turning point for that. Exports to Russia were already falling even before Ukraine and could fall further. The Iraq crisis increases nervousness further.”

    With Europe looking gloomy and the days of mega-growth in China over, the United States has offered some hope for the world economy.

    Investors will seek to gauge the strength of the U.S. rebound by examining the latest figures for retail sales and producer prices there.

    But the Bank of England is set to acknowledge surprisingly weak pay growth tomorrow when it publishes economic projections, raising questions about Britain’s readiness for its first interest rate hike since the financial crisis.(SD-Agencies)