European authorities reject over and over the possibility of a “Japanization” of the euro area; however, the threats of such a process are increasingly evident. Namely: a weak global demand, problems in the transmission of monetary policy, an essential fiscal adjustment in several countries of the Eurozone (especially in Germany), and the possibility of a higher credit crunch if finally the banks need more capital due to the next European stress tests.
The preliminary CPI of the euro zone for November will be published next Friday. The expectation is huge, especially after knowing that inflation plummeted to 0.7% last October when the ECB set a target of 2%.
The latest figures for GDP growth are another reason for concern. It is absolutely essential to re-launch the growth strategy in the Eurozone (especially in France, which is the second economic power in Europe).
Germany has also shown some signs of weakness: the country grew by barely a 0.3% in the third quarter of 2013, which has increased the voices demanding immediate measures to boost their domestic demand. So far, Angela Merkel’s government does not seem to be willing to change their policy.
Furthermore, the Eurozone needs an active ECB, which takes action in the non-conventional monetary policy. According to experts, it is not enough to reduce interest rates, but it is also necessary to adopt unconventional measures so as to guarantee liquidity –by means of a new financing operation on the long term or else with the direct purchase of sovereign debt. The first option seems mucho more feasible.
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