The European debt crisis weighed heavily on the economies, stock markets and the value of the euro in the past few years and there was a sense that solutions were unsatisfactory to say the least. There is a general notion of “kicking the can down the road” while the situation continued deteriorating.
However, there are some small signs that some kind of light could be seen at the end of the tunnel. Perhaps not too soon, but these signs could be more than green shoots.
- Peripheral countries more competitive: According to a new research by the Association of German Chambers of Industry and Commerce, the most hit countries have become more competitive: labor costs fell by 15% in Greece since 2010, Spain cut its current account deficit by 50% and Italy is close to balancing its trade deficit. The report is generally optimistic, stating that these countries are “much further along with reforms than is generally believed” and that growth should return in 2013.
- Less Doom and Gloom: Marc Faber, the legendary investor who foresaw the 80s stock market crash and was nicknamed Dr. Doom before Roubini, is now buying European stocks and see value in them after they were slammed. When a known pessimistic has something positive to say, perhaps we should listen.
- Acknowledgement about Greece’s importance: Quite a few German politicians took turns in talking about a Greek exit of the euro-zone and not giving more money to Greece. On this background, it was very interesting to hear that Michael Meister, vice chairman of Merkel’s CDU party, discussed the geopolitical importance of Greece. Also another member of parliament, Armin Laschet, mentioned Greece’s importance as a NATO member state, given Russia’s wish to enter a potential vacuum should Greece leave. This refreshing talk shows that a Grexit is not that certain any more, even if Greece continues missing its targets, which it will.
There are naturally many reasons to be pessimistic. For example, the euro-zone is contracting and there is fear that the head of the Bundesbank might quit in protest over the plans to shore up the euro.
What do you think? Will see some light at the end of the tunnel anytime soon?
Further reading: EUR/USD forecast.
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