Bumpy road ahead for euro
0 
Bumpy road ahead
Faced with both short- and long-term challenges, the euro faces a bumpy road ahead, analysts believe.
It will be tough for the euro, especially in the early years of its second decade. In the short run, the sovereign debt crisis is expected to worsen.
According to the estimate of UniCredito Italiano, eurozone countries will have to raise 560 billion euros (744.8 billion dollars) in 2011 to finance their debt, which is the highest since the birth of the euro. Portugal alone will need 20 billion euros (26.6 billion dollars) in the first half of 2011.
To fight the crisis, eurozone countries have launched large-scale austerity measures aimed at reducing their budge deficits to safe levels in three to four years. But there is a risk that the measures may hurt the countries' slow recovery and even drive some into recession.
In the long run, the recovery of the euro will be affected by some negative factors, such as an aging population, climate change and a lack of competitiveness. The debt crisis will further deepen the imbalance among euro member states.
Fabian Zuleeg, chief economist of the European Policy Center, warned that if the imbalance, the underlying reason of the debt crisis, could not be addressed, it may sow the seed of another crisis.
However, the economist said the eurozone will not fall apart as predicted by some euroskeptics. The reason lies in the fact that it would be disastrous for eurozone countries in both a economic and political sense to quit the single currency.
For the 17 members of the eurozone, there is no choice other than to deepen their integration and address the challenges together.
Go to Forum >>0 Comments