Eurozone Recovery Weak: Standing on ‘Wobbly Legs’


The economic condition in the eurozone is not showing a strong recovery and Yves Mersch, member of the European Central Bank Executive Board, noted some concerns on Monday — as reported by Reuters. “I see the big challenge for this year in the still very tentative upturn. The economic recovery in Europe still stands on wobbly legs,” said Mersch.

Inflation in the eurozone, as in many regions globally, has been a concern since its decline in December, and it’s inability to rise to the European Central Bank’s desired inflation level of just below 2 percent. “Today’s figures show that it’s too early for the ECB to become complacent about deflation risks, especially in peripheral countries,” said Peter Vanden Houte, eurozone economist with ING.

Germany has been one stronger player in the eurozone, though it remains vigilant of its economic recovery and inflation rate. Germany has dealt with denunciation of its economic strategy from outsiders, specifically the United States, which encouraged Germany to aid its struggling neighbors with a greater focus on domestic demand, rather than exports.

Mersch encouraged countries that were able to consider investing in infrastructure, according to Reuters, possibly referring to Germany. Government spending on infrastructure dropped down to 1.5 percent of the Gross Domestic Product, under the European Average of 2.5 percent, and down from its 2 percent rate in 1999.

On top of his request for great infrastructure investment, Mersch also asked that countries up their utilization of asset-backed securities, according to Reuters, saying that, “Robust Securitisation platforms could be a sensible addition to bank-based financing.” The euro didn’t rise about $1.3812 in December, and expectations from fifty analysts reported that the euro will likely fall by 2 percent to $1.33 by the first quarter. Deflation is a concern, and regardless of whether or not the euro falls as much as is expected, its former rise is certainly seeming to be at an end.”