Supply chain bottlenecks, rising energy costs and resurgence in Covid cases threaten to constrain recent pick-up. President reaffirms need for labour and pension reforms to strengthen post-pandemic economy. Weak household spending and supply chain bottlenecks are weighing on the post-pandemic rebound. Concerns over steeply rising prices are fuelling flows into ETFs that can offer protection. Gap in yield between Italian and German debt widens to levels last reached a year ago.
Some businesses benefit greatly from the bespoke trade arrangements while others struggle. Central banks are ill-equipped to counter the bottleneck slowdown. Growth spurt takes output close to pre-pandemic levels but shortages and inflation fears persist. What will be the consequences for Italy, and for Europe, if the prime minister fails to deliver? Prime Minister Mario Draghi has pledged reform — but is it enough?
Former ECB chief has transformed perceptions of his country but may not be premier for much longer. German recovery under threat; Warehouse space runs short; Retailers scramble to adapt. Success could herald a more integrated and stable eurozone. All partners have to grasp this chance to support drastic improvements in EU economic policy. Global tensions have convinced politicians that an economically strong and united Europe is more important than a balanced budget.
Costs for manufacturing and services companies rise at steepest-ever rate, IHS Markit survey shows. German central banker said to have tired of fighting an often lonely battle over bond buying and negative rates. Manage cookies. If you think the same, join us. Eurozone economy. Add to myFT Digest. Thursday, 11 November, EU economy.
Wednesday, 10 November, German economy. German economic recovery stumbles as Covid cases hit record high. Tuesday, 9 November, Covid vaccines. For example, it is likely that workers in highly productive Germany would have an easier time affording goods and services produced in less-productive Slovenia.
However, it is unlikely that other economic policies would remain unchanged if the euro failed. Even if the EU technically survived, other restrictions could be implemented on immigration or trade. Pro-euro parties would likely suffer political consequences, allowing for nationalistic parties to gain influence and to implement new fiscal policies. If Schengen also failed, the economic consequences could be extremely disruptive, even if only in the short term.
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Your Practice. Popular Courses. Table of Contents Expand. State of the Eurozone. End of the Schengen Area. Impact Outside the EU.
Reintroducing National Currencies. Impact on Banking, Forex, and Trade. A collapsed euro would likely compromise the Schengen Agreement, which allows free movement of people, goods, services, and capital. Each member country would need to reintroduce its national currency and the appropriate exchange rate for global trade. Eliminating the euro would also decentralize monetary authority back to the member nations. After intense political wrangling, unity governments under the leadership of respected European technocrats emerged in both Athens and Rome.
A2: The new Greek prime minister Lucas Papademos must ensure smooth passage of the second Greek bailout in parliament and pave the way for early elections in February Although Greek opposition parties overwhelmingly voted to support Papademos, it is unclear whether this support will extend to a new round of austerity measures, especially because these politicians will have to defend their decisions in the upcoming elections.
Even if there is opposition support for the next round of severe cuts, it is unclear whether the Papademos government will be able to implement any of these austerity measures.
If recent history is our guide, over the past 18 months Greece has not fulfilled its promises on privatizing assets or increasing tax collection despite repeated parliamentarian approval. Although European leaders and the markets are temporarily relieved that a unity government has been formed in Athens, the daunting challenge of implementation amidst heightened societal tensions is the reality the Papademos government faces.
A3: While there is no one particular issue to watch; there are several important trends to monitor in the coming days and weeks:. Look also for future IMF statements regarding Italy. A4: It is important to remember that there are two completely different timelines: market time and Merkel time.
Market time has significantly accelerated the time horizon of this crisis, particularly since the July 21 European summit. The market as well as other large economies demands to see financially sufficient and decisive decisions coming from Europe to resolve the crisis once and for all.
And we wonder why the European crisis feels like it is on running on two separate speeds? Q5: What does this all mean for the United States? Can or will the United States help rescue Europe? A5: How this continually unfolding crisis will impact the United States is also uncertain, but it will take a significant toll. A real economic shock in Europe would certainly upend the fragile U.
How exposed the United States is, both directly and indirectly through derivatives and guarantees , to the 17 eurozone economies countries is less clear. According to Dr. These daunting numbers do not include American exposure to banks in the United Kingdom, nor do they include the nine other European Union countries not in the eurozone that would be deeply impacted by the crisis.
It is important to note that this figure is four times greater than the debt caused by U. However, on the bright side, U.
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