Follow Us

Follow us on Twitter  Follow us on LinkedIn
 

17 February 2013

WSJ: German recovery hinges on eurozone


German Economy Minister Philipp Rösler warned that the return to strong growth in Europe's largest economy later this year depends on stabilisation of the eurozone, even as the undecided outcome of Sunday's vote in Cyprus suggests the current calm is still tenuous.

Despite a marked deterioration of the eurozone economy in the final months of last year, Mr Rösler expressed guarded optimism that European policymakers are getting the upper hand in the eurozone's three-year-old sovereign-debt crisis.

It is not the end of the crisis, but the beginning of the end of the crisis", Mr Rösler said. "We are expecting strong growth during the course of the year and growth of 1.6 per cent in 2014. The precondition for that is that the eurozone continues to stabilise."

It is far from certain that the current calm can be sustained. The next potential flashpoint could be Cyprus, which is seeking nearly €18 billion in international aid to prop up its banks, which were hit hard by last year's restructuring of Greek sovereign debt. European officials and analysts have warned that any false moves on the Cyprus situation could reignite the crisis.

But Mr Rösler, when asked if he would back aid for the embattled island nation, remained non-committal. He advised European leaders not to rush to judgement, but to wait to see if the next government is willing to discuss structural economic reforms, such as a restructuring of the country's banking industry, and allow European leaders to determine what impact a default in Cyprus could have on banks outside the country, especially in Greece.

He acknowledged that Germany's relative strength is partly the fruit of the country's massive stimulus programme in 2008. But he said economic stimulus for weak eurozone countries wouldn't have a similar stabilising impact if it weren't preceded by structural economic reforms. "If a strong economic framework already exists then certain temporary measures could be fruitful in individual circumstances", he said. "But that's a different case if the economic structures are inefficient or do not even exist."

Full article



© Wall Street Journal


< Next Previous >
Key
 Hover over the blue highlighted text to view the acronym meaning
Hover over these icons for more information



Add new comment