In this article, economist Barry Eichengreen warns that the euro crisis could resurface again in 2013. He says that even though the European Central Bank talked about a positive change in the markets and an economic recovery, the recession could appear again if European leaders don't solve their problems quickly.
Eichengreen says that the euro zone leaders should steady their banking systems, and not allow banks to add to government debt by expensive bailouts. To prove the point, during the recent Economic forum held in Davos, Mario Draghi, chief of European Central Bank reassured everyone of a recovering economy but added that this has not transmitted to the economy yet. Furthermore, the European Central Bank made proposals for heavily indebted countries, but Eichengreen says that the underlying problems have not been solved and the crisis can come back.
While Europe does appear to be doing better, there are still underlying concerns that have not entirely been addressed. They still suffer from the problem of having established a monetary union without the establishment of a fiscal union, which meant that they were unable to really use monetary policy to stabilize the economy.
ReplyDeleteIn addition, there is the mentioned issue of the lack of economic growth in any of the Eurozone countries. It can be hoped that the economy stabilizes and the problems are solved since some of the current signs look good. Another crisis in the Eurozone could have fairly severe consequences for other major economic powers.