Tags: EU | eurozone | economy | Fitch

Fitch Survey: Worst of Eurozone Crisis Not Over

By Michael Kling   |   Wednesday, 15 May 2013 08:20 AM

European investors believe the worst of the eurozone crisis is not over, Fitch Ratings' quarterly investor survey reveals.

Most European investors say buoyant financial markets do not reflect underlying weaknesses in the eurozone, according to the survey results.

Twenty-nine percent feel that this is a short-lived period of market calm, while 30 percent say markets are irrationally exuberant and ignoring the weak economic outlook for Europe. The remaining 41 percent of survey respondents think the worst of the crisis is over due to strong support from the European Central Bank and other policymakers.

Editor's Note:
Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop.

"There is a stark dichotomy between the continuing recession with rising unemployment across Europe and the rally in financial markets," Fitch states in its report. "If the latter is not validated by economic stabilization and progress toward banking union, the danger is that market volatility will return with a vengeance over the summer, as it did in 2012 and 2011."

Investors surveyed showed a great concern about recession and inflation risks. A record 86 percent said a prolonged recession poses a high risk to the European credit markets, up from 69 percent in the last survey.

In another indication of the low confidence in Europe's economic recovery, the respondents regarded inflation as unlikely, with only 9 percent ranking it as a high risk, while more than three times as many (29 percent) regard deflation as a high risk.

Many experts warn that the European Union must move to greater integration, especially a strong banking union, if the euro is to survive. Yet a new Pew Research Center survey finds that public support for the European Union has fallen in five of eight European countries surveyed.

"Positive views of the EU are at or near their low point in most of the countries surveyed, even among the young," the Pew report states.

Only in Germany do a majority support giving more powers to the European Union. Support for the European Union has fallen most sharply in France, where 77 percent believe the European project has made things worse, up 14 percentage points since last year.

French views are diverging from Germans' and becoming more like those of southern Europe.

"The European Union is the new sick man of Europe," the pollster states. "The effort over the past half century to create a more united Europe is now the principal casualty of the euro crisis. The European project now stands in disrepute across much of Europe."

Editor's Note: Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop.

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