Plunging stock markets across the EU | Policy Review | Policy and networking for the digital age

Plunging stock markets across the EU

In economic news, The Guardian reports on Wednesday’s mass sell-off of stocks, saying that it has prompted fears of another global financial crisis developing. Some newspapers, such as The Guardian, Phileleftheros, and Cypriot media, quote Commissioner for Economic and Financial Affairs Pierre Moscovici who stated “I don’t feel that the financial crisis is coming back. We don’t feel that we are facing the risk of a breakdown in world growth, but there are downsides that we need to address”.The EcoFin Commissioner was talking to Reuters on the sidelines of the World Economic Forum at Davos yesterday.

In The New York Times, Thomas L. Friedman however wonders if the world is heading towards a seismic change, as the once reliable foundations of the global system make way for a new era of unpredictability. Amundi’s Philippe Ithurbide and Didier Borowski are quoted in Les Echos stressing that the causes are “known and deep,” such as “the European crisis” and “the fears about global economic growth.” Stefan Beutelsbacher and Holger Zschäpitz say, in Die Welt, that the plunging stock markets are due to low growth, increased debt and decreasing oil prices.

When asked what central banks could do to counteract the slowdown in global growth, Commissioner Moscovici said that the European Central Bank has “weapons, and more ammunition.” Ahead of today’s Governing Council meeting of the ECB, the FT says that the institution is expected to hold back on further stimulus until the spring. Les Echos reports that ECB President Mario Draghi will have to perform a “balancing act” by reaffirming the institution’s determination to take action should the return of a 2% inflation rate take longer than expected without making unrealistic promises.

The economic situation has deteriorated since last month, especially in China, but the euro area shows “surprising signs of resilience”, ING Bank’s Carsten Brzeski notes. In a guest article in Handelsblatt, Commerzbank Chief Economist Jörg Krämer demands that the ECB take a cue from the US Federal Reserve and form a plan to end the era of low interest rates.

Meanwhile, Le Monde quotes a PwC report presented ahead of the 46th Annual Meeting of the World Economic Forum in Davos, which reveals that 23% of 1,409 global chief executives from 83 countries fear that economic growth will slow down in 2016; only 27% think it would improve. Such business volatility is partly due to the uncertain perspectives of the Chinese economy and to the divergent monetary policies carried out by two major central banks – the Fed and the ECB.