Is the worst over for European economies?
The new government in Greece is facing the first large-scale protests against austerity measures since it took power in June and Spain is heading toward the possibility of needing another bailout. Nonetheless, some analysts believe the worst has passed in Europe.
Howard Schneider argues that the fear of a further and dramatic decline in the Euro zone is unlikely. “Yet the likelihood of an acute new crisis arising from Europe — a preoccupation of policymakers in the United States and elsewhere for going on three years — seems to be fading along with the risk of a broader breakup of the 17-nation currency union,” he writes in The Washington Post.
Nobel Prize winner Joseph Stiglitz, however, argues that time is running out for Europe to come to political terms, to admit what he believes is austerity’s failure and implement a banking union.
“I haven’t heard from the critical people in Germany and France that, no, austerity isn’t going to work, that we need a new strategy, that we need a political settlement,” he said.
One of the looming challenges in the US and Europe will be how to extract their economies from quantitative easing. As the Financial Times notes, “In effect, central banks have been weakening their balance sheets both in terms of the declining quality of the assets they buy and the collateral they accept.”