Recent news from Europe has not been encouraging. Unemployment in the Eurozone hit a record high of 11.8 percent in November and a new report is warning of the growing poverty gap.
All of this recent bad news coming out of Europe is being reported after many European politicians said the worst of the euro crisis was over.
French President François Hollande announced last month that the euro crisis was over, saying:
The euro crisis, I've said it before, is behind us. We've given Greece the funds it was waiting for. In Spain we've helped keep the banks afloat. In Italy, even if there's political uncertainty, I'm sure the Italians will address it,
It is bad enough having one prominent European politician thinking this way, but Hollande is not alone. Italian Prime Minister Mario Monti was saying that the euro crisis was almost over back in March 2012. Spanish Prime Minister Mariano Rajoy said that he was convinced that the worst had passed in November 2012. Wolfgang Schauble, Germany's finance minister, has also said that he believes the worst is over. Most recently, President of the European Commission José Manuel Barroso said, "I think we can say that the existential threat against the euro has essentially been overcome," at a diplomatic conference in Portugal yesterday.
Elga Bartsch, an analyst at Morgan Stanley, has warned against being complacent, arguing that politics should not be overlooked:
The euro crisis seems contained for now. But we think it is not resolved for good. In addressing the fundamental flaws in the euro's institutional set-up, progress on banking union will be key. Assuming no crisis escalation, the euro area should re-emerge from recession and return to sub-par growth. Politics is the main risk,
Given that Germany and Italy have elections this year and that the xenophobes are enjoying increased support in Greece, it seems premature for European politicians to declare this fiasco over. At least German Chancellor Angela Merkel seems to realize the euro crisis is here to stay for a while.
Comments