The Euro Will Recover

Remarkably, the Euro currency still remains afloat despite the many doomsday predictions of 2012. Although European leaders continue to quarrel over economic issues, they’ve managed to agree on some things. Their perspective of the struggling Euro has shifted from blame to recovery.

Now, instead of predicting the Euro’s end, discussion circulates around how long the European economy will take to recover and what changes must be made in the future to sustain a stronger economy. The immediate crisis may have settled temporarily but its underlying causes still have yet to be thoroughly identified and resolved.

The economic output in nine of the seventeen countries using the Euro continues to decrease. European banks remain weak. Businesses in Spain and Italy struggle to obtain credit which impedes the speed of those nations’ own economic recovery. In addition, upcoming elections in Germany this fall and Italy next winter will certainly take their eyes off the European Union to focus more on national affairs.

“In 2012, the euro area leaders finally got the diagnosis right,” said Jacob Funk Kirkegaard, a research fellow at the Peterson Institute for International Economics in Washington. “It wasn’t about Greek debt or Irish banks. It was about some very fundamental design flaws that needed to be fixed. That’s what markets were looking for.” (Ewing, Jack. “In Europe, Focus Begins to Shift to the Speed of a Nascent Recovery.” The New York Times December 30, 2012.)

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As a result, the European Central Bank has promised to buy the bonds of countries like Spain, if needed, to control their borrowing costs. European officials also began looking at the structure needed to help the Euro thrive, including a permanent fund for rescuing stricken member countries and a unified system for overseeing banks.