Eurozone is recovery resistant but it could also be recession-proof

Compared to the US, EU growth may seem sluggish but if another financial  shock sends the rest of the world running backwards, the unloved single currency area may defy gravity as stubbornly as it resists reform, says Alan Shipman. For years, the eurozone has grown more slowly than the US and its growth has been unbalanced. Germany has enjoyed strong external trade and GDP growth while Italy and France stagnate, and some smaller members submerge. This has led many to condemn the eurozone’s design as fundamentally flawed and predict that it could lose peripheral members – or break up altogether – if the world economy gets hit by an American or Chinese downturn. But as fears grow of an unruly US derailing a fragile China to cause world recession, the 19-member euro area is starting to look more stable, even if it isn’t growing. Fears that a German slowdown will drag France, Italy and others into recession assume that Germany is the eurozone’s “engine of growth”. In reality its high savings and external surplus have long been a brake, and a downturn that forces Germans to spend more might do their trading partners no harm. Self-containment Because its rules compel… Read full this story

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