What are Europe's Top Three Challenges

Share On Facebook
share on Linkedin
Print

No matter where we look, Europe continues to struggle to push higher. In terms of the vaccination campaigns, the union is clearly falling behind because too few vaccines were ordered too late. EU was slow to order the BioNTech-Pfizer vaccine, even when it became the frontrunner and its efficacy had been proven.

©

As a result, Europe continues to suffer from new lockdowns. In particular, France and Poland have once again reintroduced partial closures as new cases increased. Chancellor Angela Merkel said last week that the country would have to apply an “emergency brake” to reverse some recent relaxations of restrictions as coronavirus infections accelerate. Thus, Germany itself could face a return to stricter lockdown measures by Easter.

In this context, it should not be a surprise that the Commission expects the rebound to be concentrated in the latter quarter of 2021. Meanwhile, several European countries are on track to match or surpass historical highs in terms of public debt. To be more precise, six eurozone member states have ratios well more than 100%. On the one hand, if interest expenditure remains low, elevated public debt can be sustained. The problem will emerge if the sudden tightening of financial conditions and unexpected shocks will take place.

A substantial increase in financing costs could easily destabilize the situation, question the financial stability of the whole union. For that reason, markets shouldn´t expect a fast change in asset purchases under the PEPP. In other words, the expansive policy will continue until at least the end of March 2022.

However, if eventually, the ECB decides to decrease its balance sheet, serious problems can emerge. As a result, credible fiscal consolidation strategies across the most highly indebted member states will be needed. In the case they fail to agree on adjustments, the EU could face another sovereign debt crisis.

Additionally, Europe could suffer from further weakening in the currency of its trade partners, including Turkey. If Lira continues to decrease, Turkey´s ability to repay loans to European banks will be limited as well as an appetite for European products.

As the European Central Bank (ECB) Chief Economist Phillip Lane said, “It is an important issue for European policymakers to reflect upon — how to calibrate the European fiscal response and to make sure it’s sufficient to get through this pandemic.”

 

CLICK HERE TO REGISTER FOR FREE ON ADVFN, the world's leading stocks and shares information website, provides the private investor with all the latest high-tech trading tools and includes live price data streaming, stock quotes and the option to access 'Level 2' data on all of the world's key exchanges (LSE, NYSE, NASDAQ, Euronext etc).

This area of the ADVFN.com site is for independent financial commentary. These blogs are provided by independent authors via a common carrier platform and do not represent the opinions of ADVFN Plc. ADVFN Plc does not monitor, approve, endorse or exert editorial control over these articles and does not therefore accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at ADVFN.com is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by ADVFN.COM and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Authors may or may not have positions in stocks that they are discussing but it should be considered very likely that their opinions are aligned with their trading and that they hold positions in companies, forex, commodities and other instruments they discuss.

Leave A Reply

 
Do you want to write for our Newspaper? Get in touch: newspaper@advfn.com

By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions

P: V: D:20210614 21:49:44