The euro-zone crisis may last 20 years
Author:
Patrick Artus
We should not believe that the euro-zone crisis will be solved rapidly. All the following conditions must be met before the euro zone can pull out of the crisis:
- the private sector must be sufficiently deleveraged in the countries where it is over-indebted (Spain, Greece, Ireland, Netherlands), especially after the fall in real estate prices;
- the economies must have created jobs to replace those lost due to deindustrialisation and the bursting of the real estate bubble (France, Italy, Spain, Greece, Ireland, Portugal);
- the fiscal deficits must have been reduced despite the weakness of activity;
- the countries that have a structural external deficit must have wiped it out (reindustrialisation, improvement in competitiveness, decline in demand), or federalism must have been implemented.
All this will take a very long time, which means there is a risk of major and long-lasting economic, financial, social and political instability, hence also one of depressed financial asset prices and high volatility in the financial markets for a long time to come.
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Best Regards,
Jay Shah, FRM
Expect the unexpected!!!