Is the euro crisis over yet? E&M looks at why Europe has been hit so hard and how the recovery is progressing.
The Eurozone crisis has been at the forefront of Europeans’ minds since 2011, when the economic, financial and political crisis hit the continent. Since the latter half of 2014, the biggest question concerning Europe now is whether or not the Eurocrisis is finally over. The answer to this is neither a clear yes or no, but there is a lukewarm recovery.
The financial system is slowly on its way to a restoration, although fiscal austerity within member states is expected to continue for the near future. A lot has been written lately about the Eurozone, since it’s growth figures started declining in Spring 2013 and came to a grinding halt in the second quarter of 2014. Economists are at work, gathering figures since the crisis began and attributed the GDP stagnation as an inevitable outcome of the feeble recovery that Europe had demonstrated so far. With the gap widening with time, researchers divulged that the country is still 2.4% shy of the benchmark in its GDP. Finance ministers of the EU nations that are G20 members (France, Germany Italy, Netherlands, Spain) declared at an economy summit that the cure for the continent’s economic malaise rests in the hands of three nations, France, Italy and Germany, the ministers of which have agreed to work in close cooperation in the chosen areas of transport, energy and digitalization to realize the goals of reviving the common European economic health.
Positive Readings in the Fiscal and Financial Areas
A continent that had its bulk population enjoying the highest standard of life until the end of 2012, Europe’s chances of healing and bright spots are more than just comfortable. The recovery will eventually reinstate the standard of living enjoyed by most European countries. The French economy is at a standstill and Italy has relapsed to a state of depression, causing a halt in the economic growth. Despite this, ground has been gained for the forecasted brightening of situations that is likely to gain pace from the winter this year. Youth employment has been targeted to bring about sustainable growth and revitalize the decaying economy.
Balanced recovery and growth prospects have been spotted this year too throughout the member states, which have seen external sectors slowly showing expansion, following the investment and domestic consumption. The product industry rekindles hope for common Europeans its consumerism flanged worldwide, earning foreign currencies that is at this point an antidote to the ailed monetary situation. Though Europe has hardly managed to bounce back or show resilience to the fiscal shocks in the domestic territory, the uncertain upswing is likely to gather pace with time.
The Possible Factors Behind the Dented Economy
The reason why Europe has suffered so badly from the global economic catastrophe is because international investors always have had a discriminating eye for the market and countries with domestic weaknesses are the last places they target. Although there are other nations with similar crises, the crash hit Europe hard in particular due to the slow economic recuperation has dried up capital flow to those countries as investors have steered away sensing sizeable imbalances in the external areas. Added to that is the political flaws of European integration that has contributed to the downturn state of economy.
Stimulations and Fostering
Normalization has been triggered with the EU nations showing signs of reformation and the economy moving up the growth trajectory, though shyly. Though inflation lower than the ECB standards of price stability by far has been assessed as a factor that can exacerbate the slumped recovery, disinflation has worked in favor making competitive adjustments more challenging in the member states. Fiscal and debt consolidation has been at a state of fragility and is expected to be so; other factors are indicant of the continuance in the same.
Stats in the following lines show spike-up in both eurozone and bloc. While GDP has experienced the minimal growth of 0.1% in 2013, this year it is projected to improve by 1.5% and is expected to go up by a whole 2% in the coming year. However, for eurozone, this is relatively low at 1.2% for the present year and 1.8 in the upcoming year. Development in all sectors is minimal, but existent and is expected to shoot higher with consistent effort. However, differentials in the economy of countries will continue to exist for some time now with the performing countries gaining strength than those meeting difficulties, but will expectedly lessen. Good news is only two countries have so far been singled out in the negative GDP growth chart, viz., Slovenia and Cyprus while the rest are more or less on an upward incline. The Vice-President of EMAE (Economic and Monetary Affairs and the Euro) Olli Rehn have confirmed the findings as growth has been noticed by the mid of 2013, and sustainable growth for European economy is just round the corner. More stats backing up the pronouncement are, Spanish growth rate of 0.4% moved up to 0.6% in the first quarter of this year, followed by Dutch and Portuguese rates that spurted up by 0.5 and 0.6% respectively.
With that, it can be stated with enough expectations that Europe economy will normalize and stabilize with time, and possibly by the end of next year the world will see it resurrected to considerable health. However, bold reforms need to be implemented in both the core and vulnerable countries in order to tackle the slump and initiate rebalance through demand rotation, financial fragmentation undoing, credit unlock, reinforced recruitment rate, etc. For now, all signs point at a definite healing, but only after the extra mile-long walk is taken with patience and perseverance. Politicians must work on their democratic practices in order to promise a higher youth employment rate for the commoners. In a way of saying, a brighter scenario is about to be conjured for the common Europeans.
Cover photo: Kiran Foster, CC BY 2.0