It was less than a week ago that Mario Draghi, President of the European Central Bank, spoke excitedly of “a new restored sense of relative tranquility” in the global economy, “positive contagion” across the markets, and economic recovery for the recession-ravaged Eurozone by late 2013. However, American economist Barry Eichengreen has warned that the debt crisis that has shaken Europe to its core could easily erupt again this year, unless European leaders move faster to solve their problems.
“None of the underlying problems have been solved,” Barry said today, “there is no economic growth in Europe. Germany itself is on the verge of recession. The banking union doesn’t exist. There’s less consensus on completing it than we thought last year, so the markets are going to lose patience at some point and the crisis will be back. They said all the right things last year … and they’ve been backtracking ever since.”
He went on to urge Eurozone leaders to follow up on proposals to steady the banking system and keep failed banks from adding to government debt through expensive bailouts. “European governments need to move fast, or they will be forcibly removed from their current position of complacency.”