Eurozone shows sign of recovery

PHOTO | AFP The Euro logo is seen in front of the European Central Bank (ECB) building. The eurozone may be finally returning to some semblance of normality after years of debt crisis that brought fear to the world.   AFP

In Summary

• The bloc was fighting for its life two years ago
• It has been two years since the now 18-member currency bloc was fighting for its life and investors are again knocking on the eurozone’s door, buying up assets deemed dangerous only months ago.

By AFP
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The eurozone may be finally returning to some semblance of normality after years of debt crisis that brought fear to the world.

It has been two years since the now 18-member currency bloc was fighting for its life and investors are again knocking on the eurozone’s door, buying up assets deemed dangerous only months ago.

The latest sign of this is on the bond markets, where the borrowing rates for countries that seemed on the verge of a precipice are back at levels last seen before the crisis.

“The risk associated with the eurozone has reduced significantly in the past few months,” Mr Christian Parisot, an economist at Paris-based investment bank Credit Agricole CIB, said.

Spain, Italy and bailed out Portugal and Ireland had their borrowing rates fall sharply.

By the end of the week, Spanish benchmark debt was trading at about 3.8 per cent, a long way off the danger level of more than six per cent hit in 2012. Italy was at 3.9 per cent.

Falling sovereign yields help to boost economies, and crucially lift the pressure on governments to impose yet more austerity measures on their people. “There is a broad strong market sentiment, which is getting ever more robust and resilient, which is positive for the eurozone periphery,” Mr Christian Schulz, a senior economist at German private bank Berenberg said.

Reassured, Ireland went to the markets on Tuesday and Portugal on Thursday, both meeting heavy demand for medium to long-term debt.


“PIIGS (sic) can fly,” said analyst Holger Schmieding of Berenberg bank, using the acronym coined by cynics for Portugal, Ireland, Italy, Greece and Spain.

The latter’s borrowing costs also plunged in an auction of five- and 15-year bonds.

For Schmieding, the easing comes thanks to Mario Draghi, the head of the European Central Bank. It was Draghi’s outright vow to do whatever it took to save the euro that ended the “irrational panic that had swept the euro periphery and the region as a whole,” Schmieding said.