By Dean Carroll
The eurozone crisis could be consigned to history by the middle of next year if the 17 nations in the single currency bloc continue along the path of structural reform and austerity, a prominent think-tank in Brussels has claimed.
In its annual Euro Plus Monitor report, in conjunction with the Berenberg bank, the Lisbon Council suggested that the majority of eurozone nations were “no longer living beyond their means” as a direct result of bold adjustments by policy-makers bringing down budget deficits.
Chief economist at Berenberg and principal author of the study Holger Schmieding said: “Most European countries are doing their homework. If they stay the course of reform, 2014 could turn out to be a good year for Europe.
“The reforms have gone deeper and the adjustment has progressed further than many people realise. The reforms are setting the ground for a prolonged period of recovery. The speed of convergence taking place within the eurozone is amazing. Its key members are moving closer towards a period of more balanced growth, with significantly less internal stress.”
The research ranked the 17 eurozone members – plus Poland, Sweden and the United Kingdom – on a host of criteria. Crucially, it measured the speed with which countries were adjusting to the challenges posed by the financial crisis. It also looked at long-term fundamental economic health across the continent.
Praise was garnered on Greece, Ireland, Spain, Portugal and even Cyprus for “their adjustment efforts”. The report stated: “If Cyprus and its creditors stay the course, the small and open island blessed with a British legacy of a comparatively flexible labour market could be on the verge of a Baltic style post-crisis rebound one year from now.”
Progress in Italy was labeled “patchy” and France was deemed to be a “laggard” at risk of becoming the new “sick man of Europe”. But the single currency area as a whole was said to be “strengthening its governance structure”, while “at the same time, other even more heavily-indebted major economies such as the United States and Japan are not”.
Going further, the document said: “If the eurozone stays on the reform path, and if reform laggards such as France finally join in, the eurozone could eventually emerge from the crisis as one the most dynamic of the major western economies.” It added that Germany “continued to shine” as “the continent’s growth engine”.