Europe will face financial problems next year, with strong disparities between euro area countries, said the chief economist for Europe of the French group Societe Generale, James Nixon, quoted by the American TV station CNBC.
There is still a huge political in risk in Europe. After two to three years of tough austerity, there is a risk that in some regions people will say “enough”. There are three interrelated problems: high levels of indebtedness, lack of competitiveness and a banking system highly exposed to sovereign debt. None of the problems has been solved”, said the economist.
Eurozone debt crisis dominated the news and financial markets this year because problems of the smaller economies in the monetary union such as Ireland or Greece, were threatening to spread to larger countries in the region.
ECB is implementing already unconventional measures to support the economy, Nixon said. “When you calculate how much they have increased assets in the last two years, it is over 1,000 billion euros. These are measures that keep us alive”, he said. Italy will have to refinance next year loans of 300 billion euros, which means it could end up paying higher interest rates.
“Italy is one country that stands out strongly. There are two difficult years of building structural and fiscal austerity, and the contraction of GDP. It is difficult to tell a story about the Europe as a group of economies. Germany, for example, is doing very well. It will have to go through a stock cycle in the first half of next year, but we believe that it will record an accelerated pace after that”, said Nixon. Germany has avoided the high level of indebtedness relative to GDP that generate problems in other parts of the euro area and had a relatively good evolution during the crisis, supported by exports.
