Is the Eurocrisis over?
The US sub-prime housing crisis of 2007 and the collapse of Lehman Brothers Bank on 15th September 2008 were the catalysts of the deepest financial crisis since the Great Depression.
The onset triggered a domino effect that would push peripheral EU Member States into the arms of the Troika – the entity consisting of the European Commission, the European Central Bank and the International Monetary Fund – starting with Greece and ending with Ireland, Portugal, Spain and Cyprus.
Now the world economy is finally recovering, with the IMF predicting global growth of 3.7% this year, the highest since the crash, and 2.8% growth in the US, showing how much the UK and world economies depend on the US. However, factors such as under performance of export growth and tapering of QE are testing optimism about the strength of the recovery both in the US and worldwide.
The Eurozone is expected to grow at 1.2% per cent this year. This has been boosted by a return to growth by Ireland and Spain and a miraculous recovery by Cyprus, which has been achieved by abiding to the Troika’s bailout programmes. Yet unemployment still remains high and poses a threat to the recovery.
The UK economy is also “booming”. Like the Fed, the Bank of England increased its involvement in monetary policy, slashing interest rates to a record low 0.5% to fuel borrowing, but levels of household debt are now at a record high, even greater than before the crash. The housing market might be overheating due to the Government’s Help to Buy Scheme, which has stimulated house prices by pushing many to stretch their income in an effort to get onto the property ladder. House prices are now at a record 7.5 times average earnings, even surpassing the 2007 ratio.
The crisis has shown what can be achieved by working hard together, but it has also fuelled discontent and disillusionment with the European project, giving way for an irresistible pull back to the principles of national sovereignty at a time when unanimity remains crucial – so is this really the end of the Eurocrisis or simply a hiatus?