Citi warns Europe may see a mild recession in 2012

The recent upswing in equity markets notwithstanding, Europe is not yet out of the woods as many EU nations continue to grapple with high debt. Last night, amid violent protests in Athens, the Greek parliament approved an unpopular austerity bill to secure a second EU-IMF bailout and avoid national bankruptcy.

However, experts feel the bad news is far from over. In an interview to CNBC-TV18, John Woods, MD and Chief Investment Strategist, Citi Private Bank warned that Europe may see a mild recession in 2012.
He thinks that Europe Central Bank's liquidity injection will give direction to the markets. Woods, however, is also a bit worried that the current rally may last only six to eight weeks before fizzling out.
While the Asian markets are trying to keep pace with the European counterparts, Woods pointed out that slowdown in Asia is visible across several countries. Here is an edited transcript of his comments. Also watch the accompanying video. Q: Let me ask you about Greece, how do you think financial markets will read the current bout of news as it's coming through from Greece over the last couple of days?
A: It seems the market is largely priced in the successful signing of the deal. There are awful lot of question marks that remains at least another USD 325 million of austerity measures. But it is an important first step and it think it obviates or mitigates the risk of a default on that USD 14.5 billion due in mid March. Now it is a near term positive but a much more important, of course, is the liquidity support from the ECB. Q: On that parameter what do you sense in terms of risk level right now? Is it still intact after the resolution on Greece or do you expect to see a little bit of scaling down given how much equity markets worldwide have rallied?
A: A short term correction is probably necessary and shouldn