Eurozone Facing Breaking Point

January 19, 2009 by admin · Leave a Comment
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With the consequences of credit crisis continue influence various kinds of business, at the beginning of 2009, we all want to know what lies ahead for the world economy and financial markets?
According to some critisism, the event that genuinely changed the world in 2008 was not the credit crunch but the catastrophic interaction of governmental and managerial incompetence that led to the collapse of big financial institutions across America, Britain and Europe, including Fannie Mae and Lehman Brothers. The financial crisis was said to be only what triggered the sudden implosion of economic activity around the world. So, it was a limited and manageable problem in one part of the market and banking sector. However, it suddenly went out of control and transmogrified into the worst financial crisis that the world had ever seen.
Some analysts said that personal leadership matters in economic crises, just as it does in revolutions and wars. Great leadership could change the bad situation. For example, Paul Volcker’s arrival at the Federal Reserve Board ended the inflationary crises of the 1970s and changed economic history.
However, it seems that today’s world is lack of such great leaders to deal with the recent long-lasting market downturn. Some people even think that the worsen economic condition is largely due to the Bush Administration’s ideological tunnel-vision. If the analysis is even partly right, the most important thing in 2009 should be replacing the worst President and worst Treasury Secretary in US history with individuals better qualified to do these jobs. It seems reasonable to expect, therefore, that conditions in the world economy will change gradually for the better after the Obama Administration came. Though the economy in the US will certainly suffer another few months of severe contraction and job cut, signs of recovery could start to appear in the property and financial sector by the early summer.
The real US economy should rebound fairly sharply. As a result, the dollar is going to be hard currency. For the rest of the world, a strong-dollar recovery in US would obviously do good for business and consumer confidence. But, there is a downside risk, especially in the eurozone, and also in the UK. There could be a tardy and muddled policy response from governments and central banks outside the US.
It’s hoped that the economic conditions in the UK should improve significantly by the middle of 2009 and the focus of global economic troubles is likely to shift from UK and US to continental Europe, with the unresponsive central banks, the overvalued currency and the squabbling politicians. If 2008 was the year in which the Anglo-Saxon economic model was tested to destruction, it may well be the turn of the European single-currency zone in 2009.