Home » Business » Biz Special
Eurozone likely to remain calm in year ahead
Print Edition
Last year was the least tumultuous for the eurozone since Greece revealed a vast hole in its books back in 2009.
The consensus is that 2014 will be just as calm — a view held by some who were predicting the currency bloc’s demise little more than a year ago.
The political will to keep the show on the road has held firm, the European Central Bank’s pledge to underpin the euro continues to stave off bond market pressure and there is the prospect of economies growing at least a little.
Spain, Italy and Portugal are all emerging from recession and Greece should follow suit this year.
Yet there are reasons to be cautious.
High unemployment, austerity fatigue and still anemic growth offer the perfect backdrop for fringe parties to prosper at May’s European parliamentary elections.
Some pundits predict a group of anti-euro parties including the National Front in France, Britain’s UKIP, Syriza in Greece and the Dutch Freedom Party could capture 20 percent or more of the seats.
That could pressure the EU’s main party groups to tack right and challenge Europe’s ability to integrate further given new powers the parliament will have to rule on the majority of EU legislation.
“It could pull mainstream parties into more euroskeptic positions and complicate both the appointment of a new European Commission and the task of passing banking union-related legislation,” said Alastair Newton, senior political analyst at Nomura Securities.
Preventing future crises
That the EU has fallen short of its initial plans for a banking union to prevent future financial crises is plain.
For several years at least, the buck for a failing bank will ultimately stop with national governments.
The ECB will publish health tests of Europe’s biggest banks prior to taking over their supervision in November. The scope for a shock is limited given the extent to which banks have recapitalized. Still, lending is likely to remain constrained until the tests are complete.
The main reason to be cheerful about the eurozone is the markets’ unwillingness to test the ECB’s safety net. Any hole in that would change the terms of the game at a stroke.
Germany’s Constitutional Court will rule soon on the ECB’s bond-buying program, its as yet unused mechanism to protect the eurozone.
The ECB has consistently said it is buying time for countries to put their houses in order by curbing debts and enacting economic reforms.
The main flashpoints are Italy, which has stagnated for a decade and has a coalition government which may lack the cohesion to respond, and France which is teetering on the edge of a new recession.
Austerity fatigue is most potent in Greece, the country that sparked the debt crisis.
Its coalition government refuses to countenance more cuts and will need some form of debt relief to put its finances on a sustainable path.
The history of the eurozone crisis shows that while policymakers lose their sense of urgency when the pressure diminishes, they rush to bolster their defenses when the heat comes on.
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
