• Home
  • Home
  • Daily Papers
  • Awards / Events
  • GlobalCapital
  • Free Trial
Close

Copying and distributing are prohibited without permission of the publisher.

Watermark
  • Print

Resort to protectionism against eurozone depression: economist

By Emerging Markets Editorial Team
12 Jun 2013

The rest of the world must take steps to protect itself from the consequences of a depression in the eurozone, an economist says before the G8 meeting

The G8 summit of leaders from Canada, France, Germany, Italy, Japan, Russia, the US and the UK will take place in Northern Ireland next week, and protests have started in London.

The summit is unlikely to come to any meaningful conclusion regarding how to fix the eurozone's problem, with Germany's Chancellor Angela Merkel, France's President Francois Hollande and Italy's Prime Minister Enrico Letta in disagreement over what should be done, Carl Weinberg, Chief Economist at High Frequency Economics, noted.

Weinberg doubts that the leaders "will formally discuss things on which they stand no chance of agreement" but believes that the "depression in euroland" will come up in discussions on the sidelines.

He warned that other governments need to worry about unrest in the world's largest economy, where unemployment has hit record after record high.

The decline in the eurozone has "the potential to disrupt world trade and finance, and even the global balance of power," Weinberg wrote in a note on the global economy.

The solution to the eurozone woes, according to him, is a combination of mutualized bank recapitalization and deposit insurance and fiscal and monetary stimulus.

Other analysts advocate similar solutions but politicians in the eurozone cannot agree on banking union and on whether austerity needs to be relaxed and the European Central Bank (ECB) be allowed to print money. 

 More from Emergingmarkets.org
 In eurozone, blame the creditors too: Stephen King
 Ruchir Sharma: The third coming of emerging markets
 Register for free to receive the weekly newsletter

"The time has come for the other G8 leaders to acknowledge that euroland cannot avoid a depression given its structural and political constraints," Weinberg said.

"They should therefore coordinate efforts to protect themselves from any economic or financial shocks originating in the zone."

This would involve measures like monitoring financial liabilities to borrowers in the eurozone and finding alternative trade partners "for the day when euroland banking woes render enterprises in the zone unable to function," he said.

"This sounds a lot like isolationism and protectionism... and it is," Weinberg said.

"But there is a new reality in the world, which is that euroland is a 'sunset' economy and will contract on trend for a long time to come."

He recommended partnering with 'sunrise' economies instead, and said the move away from the eurozone was already underway, with the establishment of new trade patterns with China and emerging Asia over old trade patterns. 

- Follow us on twitter @emrgingmarkets
By Emerging Markets Editorial Team
12 Jun 2013
  • HOME
  • GLOBALMARKETS
  • Latest news from GlobalMarkets

    1. EM debt pressures build as IMF calls for ‘early’ action on restructuring

      15 Oct 2020
    2. Post-Covid world will demand ‘new more humane’ capitalism

      15 Oct 2020
    3. IADB to roll out hurricane clauses as small state pleas gain traction

      15 Oct 2020
    4. IMF will need Bank’s help to fulfil climate ambition

      15 Oct 2020
    5. Biden victory to boost Asia but China tensions to remain

      15 Oct 2020
  • Most viewed: GlobalMarkets

  • Print
  • Latest news from GlobalMarkets

    1. EM debt pressures build as IMF calls for ‘early’ action on restructuring

      15 Oct 2020
    2. Post-Covid world will demand ‘new more humane’ capitalism

      15 Oct 2020
    3. IADB to roll out hurricane clauses as small state pleas gain traction

      15 Oct 2020
    4. IMF will need Bank’s help to fulfil climate ambition

      15 Oct 2020
    5. Biden victory to boost Asia but China tensions to remain

      15 Oct 2020
  • Most viewed: GlobalMarkets

Further reading

  • Asset owners to attempt daring, immediate emission cuts

    SRI / Green Bonds

    Asset owners to attempt daring, immediate emission cuts

  • CS appoints global head of renewables

    People News

    CS appoints global head of renewables

  • Trafigura causes a stir with debut Schuldschein

    Private Debt

    Trafigura causes a stir with debut Schuldschein

  • Corporate social bonds to take off, in varied formats

    SRI / Green Bonds

    Corporate social bonds to take off, in varied formats

Global Capital

All material subject to strictly enforced copyright laws. © 2020 Euromoney Institutional Investor PLC group

About Us

  • About us
  • Contact us
  • Modern Slavery Act Transparency Statement

Connect with us

  • LinkedIn
  • @GlobalCapNews

Services

  • Advertise
  • Our partners
  • RSS
  • GlobalCapital Events
  • Events calendar
  • Social community

My Account

  • Renew
  • Subscribe
  • FAQ
  • Feedback
  • Terms and Conditions
  • Privacy Policy
  • Cookies

Quick Links

  • All League Tables
  • Bank Profiles
  • Bond Comments
  • Deals & Deal Pipelines
  • Polls and Awards
  • GlobalCapital Archive
  • Special Reports Archive