The Eurozone: an island of stability?
Two weeks ago the US stock markets experienced one of the worst weeks since the financial crisis. The Eurozone seemed like an island of stability by comparison. Economic analysts discuss what hopes are justified and what risks should be borne in mind.
Much has changed on the periphery
The improved situation in the peripheral states is the chief reason why the Eurozone has remained so stable despite the recent turbulence on the markets, writes Daniel Gros, Director of the Centre for European Policy Studies, in a commentary published by Jornal de Negócios:
“It is no longer accurate to view the economies of the periphery as weak debtors. Indeed, with the exception of Greece, they are all now running current-account surpluses, meaning that far from depending on capital inflows, they are repaying their foreign debt. ... If the situation persists for a few more years, the eurozone might get to a point where it consists only of creditor countries, some with a large net foreign asset position (Germany and the Netherlands) and others (the peripheral countries) with a small positive external position.”
Time for equilibrium!
Commenting in Alternatives Economiques Xavier Timbeau, head of the French economic research institute OFCE, is less optimistic:
“The euro's rise will have a negative impact on inflation and fuel new fears of deflation. And the euro exchange rate hasn't peaked yet. The Eurozone has registered a considerable foreign trade surplus. ... If that surplus isn't reduced (through stronger demand in Germany, for example), the euro will continue to rise. ... Due to the widely diverging economic situations in European countries the sweeping consequences will not be limited to less investment in the Eurozone. ... Once again we will be facing the risk of the Eurozone's total collapse.”