Hollande To Draw A Line Under Euro Crisis

The spark which ignited the crisis in the single European currency was the knowledge that Greece had fudged its entry qualifications to the Euro and had a much larger deficit than permitted. This led investors to question whether Greece could meet its obligations and pushed up the interest that the nation was asked to pay in the bond markets to unsustainable levels. In order to remain in the Euro, Greece had to obtain two EU/IMF bailouts and embark on radical economic reform and austerity measures. The global financial crisis led to the collapse of a property bubble in Ireland which ultimately forced the nation into a bailout. Portugal and Cyprus also needed formal sovereign bailouts and Spain needed support to prop up its banking sector after its own property bubble collapsed.

The European sovereign debt crisis threatened to destroy the Euro and saw the currency fall in value against other major currencies as the various waves of the crisis broke. As each drama was resolved, the value of the currency recovered, only to fall back when the next wave appeared. A decisive factor in calming the markets was the announcement by the European Central Bank (ECB) that it would provide unlimited support for bonds issued by a member state in receipt of an EU/IMF bailout. However, that was not the end of Euro turbulence.

The French President, Francois Hollande, seems to be trying to draw a line under the European sovereign debt-Euro crisis. During a visit to Japan, Mr Hollande told leading businessmen: “What you need to understand here in Japan is that the crisis in Europe is over. I believe that the crisis, far from weakening the Eurozone, will strengthen it. Now, we have all the instruments of stability and solidarity. There was an improvement in the economic governance of the Eurozone, we set up a banking union, we have rules on budgetary matters that allow us to be better coordinated and have a form of convergence." There is much to be said for positive thinking.

Whilst it does seem that talk of a Greek or Cypriot exit from the Euro has all but ended, the crisis is far from over. Slovenia may require a bailout because of problems in its banking sector. The political situation in Italy remains fragile and it would not take much to plunge the nation deeper into an economic crisis. Whilst Spain is busy reforming its economy, it is suffering with mass unemployment; France too is experiencing its worst period of unemployment in 15 years. The Eurozone has been in recession for the past 18 months; the longest in its history. It is surely too early to state that the crisis is over, no matter how soothing it sounds.