Euro woes

It is evident that while the threat of a Eurozone break-up may have subsided, a long term solution to the debt crisis is yet to be found.

The problems in Eurozone have not gone away. Essentially people are either choosing to ignore them or are seeing what they want to see.

Currently unemployment continues to rise in countries such as Greece and Spain, a delayed solution may see the crisis escalate, a move which is likely to hurt investor morale.

Gross domestic product in the Euro zone shrank 0.6 percent in the October-December quarter from the previous three months, Eurostat, the statistical agency of the EU reported from Luxembourg. The figure, the same as the initial estimate made Feb. 14, confirmed the gloom surrounding the region’s economic prospects.

All of the major Euro area economies shrank in the fourth quarter, with Germany contracting 0.6 percent, France 0.3 percent, Spain 0.8 percent and Italy 0.9 percent.

Household spending fell 0.4 percent from the third quarter, while investment fell 1.1 percent and exports fell 0.9 percent.

For all of 2012, GDP in the Euro zone shrank 0.9 percent from 2011.The Eurozone is clearly the main weak link in the global economy.

Countries such as Greece and the Republic of Ireland that have been bailed out by international lenders continue to see their economies shrink. Meanwhile larger economies such as Spain have imposed spending cuts in an attempt to avoid having to ask for a bailout.The current situation in Cyprus serves to highlight the problem.

 

The austerity measures in many countries - mostly in southern Europe - have combined tax rises with cuts in salaries, pensions, benefits and social services.

Apart from the social cost the spectre of unemployment represents a major threat to economic recovery within the EU together with all the global implications it brings.