The European Union is on the road to recovery from the economic downturn, but ANZ Chief Mike Smith warns that the region isn’t out of the hole just yet and could potentially relapse into crisis.
The bailouts last year certainly helped stabilise the economy to a degree, but Mr Smith, a board member of the Institute of International Finance, cautions that this may have simply “bought time” for the banks – some of which face the prospect of being nationalised.
“Despite the relative calm that has followed the Greek bailout, the basic problem still hasn't been resolved - which is, the economies of Greece, Portugal, Spain and Ireland simply aren't competitive while they are part of the eurozone,” the Brisbane Times quoted Mr Smith during his address to the Asian and Oceanian Stock Exchanges Federation in Sydney.
SEE RELATED STORIES FROM THE WDM CONTENT NETWORK:
According to the Sydney Morning Herald, data released yesterday said that the growth of loans in the region have slowed 0.4 per cent since January, particularly in Spain, Portugal and Ireland where controlled government spending has been a significant challenge.
In his address, Mr Smith also questioned the inclusion of some struggling nations in the EU, saying their struggles will be difficult to alleviate while they’re under the euro. Since these are not simple problems to solve, he’s predicting that another crisis will occur in Europe.
“It is difficult to foresee what the next event is going to be that triggers market uncertainty … other than to say, there will be another crisis because the problems in Europe are going to take many years to work through,” he said.