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It's no secret that the Eurozone is an economically struggling region of the world, and although it has been recovering from the blow caused by its economic crisis, it has been doing so very feebly. Now, the recovery has suddenly stopped; in the second quarter of the year, the Eurozone was recorded as growing 0%. While economists say that the overall Eurozone economy should not sink into a recession yet again, it does not seem like the recovery will pick up its pace anytime soon. The future of its countries economies all depends on what actions the European Central Bank takes. #
This time it seems that some of the zone's bigger economies, including France, Germany, and Italy, are the major contributors to the problem, with small but significant decreases from the last quarter. Italy ended up in a recession, its third one since the initial global economic crisis. Germany, which is the zone's largest economy, fell due to several circumstances, including a decrease in its construction industry. In contrast, the zone's more peripheral countries are showing promising results, with Portugal, Spain, and the Netherlands all growing at more than 0.5%. However, these victories pale when it is considered just how heavily the Eurozone economy depends on its biggest countries, especially Germany. Another source of worry is the problems in Ukraine. It is probable that Russia, which has already had sanctions placed on it by Europe, may just decide to invade Ukraine fully, only adding more political tension to Eurozone woes.
Economic problems in the Eurozone impact the entire global economy, seeing as it encompasses so many important countries. As a result, measures for boosting economic growth are being proposed. Another problem is being simultaneously addressed: the zone's low, low inflation. If the euro keeps strengthening and Europe goes into deflation, prices and wages would both fall dramatically and debts would become deadlier. Already, earlier this summer the ECB lowered its borrowing rate and proposed negative interest rates, becoming the first major central bank to do the latter. These actions have helped by lowering interest rates and the value of the euro, but it is not yet enough. The ECB also said that it would lend more to banks who decide to make their own general lending practices more generous. However, a much more popular proposition is quantitative easing--the buying of government and financial assets using new money. This could potentially lower interest rates and get more money in the system. The ECB is stubbornly against using it right now, claiming it should be used in only more drastic cases.
As of now, it is a shaky and uncertain future for the Eurozone economy. Faced with weakening economies and inflation, actions will have to be taken to kickstart it into full force again. What do you think the Eurozone should do in the light of these issues?
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