The Eurozone remains in focus as experts try to forecast where it’s headed in the near to mid-term. News that an 18-month long recession has ended is setting a positive tone but other factors, many out of the European Union’s control, continue to threaten this already beaten down economy. From one week to the next headlines are sending mixed messages about the state of the E.U.’s financial situation, leaving investors bracing for all possibilities.
The Pessimist Point Of View
The jobless rate in the E.U. is still a staggering 12.1 EU Headlines Sending Mixed Messages per cent! Without job creation, the four-year-old debt crisis will continue to be a lag on the overall European economy. Some countries continue to fare better than others, but overall the region is still in trouble. A new report released by BMO Capital Markets says the E.U. may experience a period of calm before relapsing into recession once again, further deepening its debt crisis. The report points to the Syrian conflict and the U.S. Federal Reserve’s plan to reign in quantitative easing measures, as the two main reasons the E.U. economy is under threat again.
Looking On The Bright Side
The Eurozone has exited a nearly two-year-long recession. Economic slowdown has been dramatic but there is a genuine feeling that after hitting rock bottom that there’s nowhere else to go but up. The Euro is also stronger against the U.S. dollar and European equities have been rallying on the news that the continent is recovering from recession. European Central Bank President Mario Draghi, is still hinting at a possible rate cut which would help to stimulate the economy.
Finding Middle Ground
Moderates suggest proceeding with as much caution as possible; the situation in Europe has improved, but most countries still remain deeply in debt, despite dramatic austerity measures put in place. Experts forecast unemployment will remain above 12 per cent until 2015, although bad news for Europeans looking for jobs it does offer some stability to investors looking to make a move. Germany, the E.U.’s largest economy is returning to growth in its exports but there’s still concern among German companies that in order to compete job losses and cut backs are inevitable.
The Global Impact
Economic headlines can be confusing to anyone watching the market day-to-day. Several days of optimism can easily be followed by weeks of pessimism Any Canadian investor looking to add European stocks to their portfolio should attempt to read beyond the headlines. If a positive report comes out, question why and what industry is affected – and do the same for any negative news. One thing is for certain, countries around the world are waiting for the Eurozone recovery before they can start making any significant moves within their own economies. The E.U. debt crisis has a bigger impact on the world than the U.S. housing crisis did. Everyone is rallying for the E.U. to get back up for the sake of many economies around the world.