This Economist article talks about the
decrease of the interest rates in Spain and Italy, which as of January 2013,
both countries closed with a 2.5 percentage points lower than last years. This
January closure has set optimism to the minds of the European investors and
economists such as Huw van Steenis, an analyst at Morgan Stanley,
"reckons that banks (mainly those in the core of Europe) may repay €100
billion-200 billion ($133 billion-266 billion) of the €1 trillion in cash they
borrowed from the central bank in 2011 and 2012. As well as Mario Draghi, the
president of the European Central Bank (ECB), says that a 'positive contagion'
is sweeping through Europe." Institutional investors such as pension
funds and insurers are now also returning to these markets. Part of the
explanation for this is that Spanish and Italian bonds still offer strong
yields. Although these numbers may sound promising, “cautious investors such as
insurers tend to sell bonds that display high volatility or that fall rapidly
in price because these variables affect their internal measures of risk.” This
optimist idea that Europe may give the illusion of a light outside of the
tunnel approach, but that may be a little premature; there is a whole other
side of Europe that still has to have an economical upgrading.
Perhaps, it is not yet time to celebrate, it is time to
cooperate in order to have a fiscal policy that can lead to the time of
celebration, as an article on Foreign Policy stated, “every month
Europe's stronger economies are getting pulled deeper and deeper into a crisis
they neither can control nor have fully explained to their citizens.” This vast
European economic scandal just may also have another ally that can contribute
to the closure of the Euro Zone Crisis, the US has increased its free trade agreement with the EU, in which can promote security and stability in the
European market, creating incentives for investors to invest in Europe and
increase the export of manufactured goods from Europe.
Its tough to decide if the Eurozone crisis is a coordination or a cooperation problem but Im guessing its a little bit of both. There's always so many factors involved in a situation like this and so there are always tons of potential solutions all or none of which may make things better or worse. I definitely think a free trade agreement between the US and EU is at least worth trying, we definitely need to open trade with more countries to offset our reliance on cheap Chinese goods,(at least in my perception) and it was news to me that the US has a relatively restricted free trade policy globally. I would be very interested to see the results of more trade between the Western developed nations.
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