Tags: UK | Telegraph | Eurozone | Currency

UK's Telegraph: Eurozone Hooked on Failed Currency

By    |   Sunday, 22 Dec 2013 03:14 PM

While the U.S. and the U.K. continue recovering, the eurozone remains stuck in its economic morass.

And that widening gulf shows eurozone leaders are in denial over the failed euro, writes Jeremy Warner for the U.K.-based Telegraph. "The euro offers no plausible path back to growth, yet they cannot or will not give up on it."

The diverging financial picture over the last few years should give eurozone leaders reason to pause. It doesn't, he says. The euro elite remains stuck on the same old path, with no idea how to veer from their road to ruin. One inadequate response follows another.

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The proposal for a banking union is the latest example of the eurozone's inadequate responses, according to Warner. "Overly complicated and chronically underfunded, it fails some of the most basic tests for any credible banking union."

The proposal lacks a plan for sharing costs. Member nations have power to veto decisions to wind down failing banks. Leaders think issues can be resolved over time, but the euro lacks the luxury of time, Warner warns. He says EU leaders struggling with integration have attained only "policy paralysis and economic ruin."

Central banks in Britain and America have employed money-printing tools and super-low interest rates, he says, citing the Federal Reserve's quantitative easing stimulus. They moved quickly recapitalize their banks, and have benefited from more flexible labor markets and more business-friendly economies.

Germany blocked any significant EU stimulus. The eurozone managed to shore up its banking system to prevent a break-up but did not boost demand.

European nations are unwilling to consider sharing the fiscal burden, and few are willing to reform their labor market.

European stress tests are starting and aren't expected to be completed for another year, he says. "Again, it is not clear Europe has the luxury of time."

The eurozone may see a modest recovery in 2014, but the region is vulnerable to setbacks in other parts of the world, as its recovery is relying on exports, experts told The Wall Street Journal.

The composite Purchasing Managers Index from the data firm Markit indicates modest but uneven growth.

"Growth is concentrated in manufacturing, where rising exports have helped push growth…while weak domestic demand led to further slowing in service-sector growth," said Markit Chief Economist Chris Williamson, according to the Journal.

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Eurozone leaders are in denial over the failed euro, writes Jeremy Warner for the U.K.-based Telegraph.
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2013-14-22
Sunday, 22 Dec 2013 03:14 PM
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