Ivan Zhigalov
Some optimistic personalities say that the global crisis is about to be over. Their standpoint is based on several recent GDP forecasts, which show some economic recovery. Their opponents say that the global crisis is still underway and will only escalate in the near future.
For example, one of the latest forecasts published by the Euro Commission suggests that the eurozone cannot even hope for an economic recovery in 2013. Therefore, they say there is no reason to be optimistic about the global economic prospects, as the eurozone crisis is tightly integrated into the global economy and keeps affecting it. Moreover, there are recessionary signs in the US economy. The Chinese economic growth is slowing down…
Eurozone Crisis
So, let’s go back to the latest report published by the Euro Commission. It suggests that the crisis may stay with us for decades. In particular, Patrick Artus, Chief economist at Natixis, says that it may take up to 20 years. The crisis may be mild. Still, a prolonged crisis is dangerous. Yet, even 20 years later, Europe will manage to come out of the crisis only if a certain scenario is implemented. It must include job recovery, lower deficit and transition to federalism.
According to Eugene Olkhovsky, ’s leading expert in financial markets form Canada, today’s economic situation in the eurozone is far from that gloomy. Obviously, there is a crisis. However, there is some stabilization.
After Mario Draghi promised to purchase risky eurozone bonds without limitations, experts became more optimistic. As you remember, they used to predict that at least some of the weakened southern economies (Greece, Spain , Portugal , Italy) would leave the eurozone in mid or late 2012. However, as we can see, the eurozone still preserves its integrity.
Does it mean that the optimists are right and the crisis is over? No, they are not. The crisis is still underway. Words and promises do not always lead to corresponding actions. Politicians may well promote some ideas or simply try to calm down the society.
In this aspect, several reports show that the business activity in the eurozone’s private sector keeps declining. This is a pessimistic sign. Therefore, economic recovery in Europe will definitely take some time.
Problems to Solve
Experts say that it is difficult to make any clear forecasts in this situation when everything looks so unstable.
Still, they name several factors that could ease the crisis:
· Banking federalism. It will allow those weakened eurozone economies to get rid of the dependence on international financial institution, simultaneously lowering the risk of a financial collapse for all eurozone economies.
· European budgetary agreement.
· Reaction to the ECB’s credit policy (it is about reforms).
They also name inevitable problems that have to be solved:
· Unemployment (especially among the youth).
· Political situation in southern eurozone states (anti-austerity protests).
· Economic slowdown in stronger eurozone economies (including France and Germany)
· It is hard to implement various measures as there is true unity in Europe on all the political and economic levels.
Outside Europe: Clam Before The Storm?
Europe is not the only crisis-ridden region of the world. Asian-Pacific region and Latin America are also suffering from the global crisis. People in those countries are getting poorer. The only region that can see its people getting wealthier is North America.
Strange as it may seem, the USA stays relatively stable despite the fact that its public debt is unbelievably high.
EURUSD
At the same time, the common European currency strengthened on expectations that Greece will get another tranche for international lenders. However, Greece won’t benefit from that in the long run. The only way out for the country is to quit the eurozone. That is why it is still better to consider sales. The closest levels of resistance are 1,2840 and 1,2895. The bearish target is 1,2680.
The chart below, courtesy of , reflects the current state of affairs in the market of EURUSD:
Ivan Zhigalov
