A New Roadmap For The Eurozone, 2014-2018


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A New Roadmap For The Eurozone, 2014-2018
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‘While we believe that the eurozone can continue muddling through, the structural impediments underpinning the crisis have not been fully resolved, with risks to systemic stability continuing to lurk beneath the surface. The ECB can do much to keep banks and sovereign bond issuers ticking over, but without heroic efforts to improve competitiveness across the bloc and restore debt sustainability, monetary stimulus can only ever buy time…’

Business Monitor International (BMI) has published a Special Report outlining our strategic macroeconomic outlook for the eurozone over the course of 2014-2018 and beyond.

The report outlines:

  • Our new conviction macro strategy for the eurozone following several crucial policy developments that have significantly reduced near-term risks of the currency union disbanding.
  • Our outlook for economic growth, fiscal policy, monetary policy, and political and economic reforms.
  • Why economic rebalancing in the periphery is suboptimal and will anchor a new low-growth, high-debt equilibrium.
  • Why the eventual configuration of a eurozone banking union will also be suboptimal and risk repeating the mistakes made when the euro was first introduced.
  • Risks to our medium-term outlook: deflation, a Franco-German political spat, an ailing Italian economy, and the possibility of further financial and economic fracturing.

The report also presents our concerns for the long term: A market revolt, further debt restructurings, and the possibility of the eurozone becoming less relevant to its member states if deep structural reforms to improve the integrity of the euro area are not pursued.

The Special Report draws upon BMI’s expertise to provide a further strategic dimension to our Country Risk and Industry services. It will be of interest to all corporate, banking and institutional sectors which have exposure to the eurozone. The focus on the banking sector and macro outlook means that this report will appeal most to BFS clients, economists, and strategic decision makers in the corporate sector.

We outline the progression of our eurozone macro strategy since our initial call in early 2010 for a sovereign debt default in Greece. We then highlight the key policy developments which we believe have fundamentally altered the outlook for the eurozone over the next five years. In light of these developments, we present our views for the eurozone economy, policymaking and the banking sector, while highlighting the major risks to our strategic outlook.

The report demonstrates BMI’s ability to look beyond near-term trends and utilise our breadth and depth of knowledge to produce a conviction macro strategy relevant to investors with exposure to the eurozone.