简体中文
Eurozone economy is expected to grow by about 1.6 percent in 2016, slightly stronger than market expectations, partly thanks to the perseverance of the European Central Bank (ECB) in pumping money into the market through a bond-buying program since January 2015.
Of equal significance, the year 2016 has been the first full year that the eurozone's gross domestic product (GDP) was back to its pre-crisis size.
Risks, however, have also markedly rised in 2016 in the 19-country eurozone.
"Much of the concern in the eurozone now centers on the euro," banking giant HSBC said earlier in a special report.
In the second half of 2016, the euro fell to the lowest level in years. "Politics is set to become a bigger driver of the euro from here," HSBC said.
Meanwhile, the market is worried about the fade-away effect of an exceptionally loose monetary policy. The much-anticipated structural reforms are heading to nowhere.
European QE
The ECB announced government bond purchases in January 2015.
As an unconventional policy tool to boost an economic recovery in the euro area, the expanded asset purchase program, known as European version of the Quantitative Easing (QE), has been implemented since March 2015.
Since then, the ECB has been keeping a loose monetary policy, leaving key interest rates at the historical lowest level, in particular cutting the deposit rate to negative territory.
"So far, monetary policy has been the only expansionary macroeconomic policy in support of the recovery," ECB Vice President Victor Constancio has said.
On Dec. 8, the ECB said it would conduct an extra nine months of QE to the end of 2017, but scale down monthly bond purchases from 80 billion euros (84 billion U.S. dollars) to 60 billion euros (63 billion dollars).
Undoubtedly, the ECB's loose monetary policy has significantly contributed to the eurozone recovery.
In its annual report released in early November, the German Council of Economic Experts (GCEE) said that the ECB's unusually expansionary monetary policy has been a key factor in the eurozone upturn.
Though ECB President Mario Draghi insisted he was not tapering his stimulus, the GCEE disagreed, saying that current monetary was no longer appropriate for the eurozone.
"The extent of monetary easing in the euro area is no longer appropriate given the region's economic recovery. Consequently, the ECB should slow down its bond purchases and end them earlier," the GCEE said.
No decisive reforms
But Draghi and the GCEE agreed on one thing - The monetary policy cannot sustainably support eurozone recovery on its own.
"One of the key takeaways from the 2016 World Bank-IMF Annual Meetings was that monetary policy cannot be the only game in town," Draghi said.
Draghi repeatedly stressed that other policy areas must contribute much more decisively, both at the national and the European level.
The GCEE agreed. The upswing in the eurozone economy can't sustain itself given the considerable structural problems that persist in the region, it said.
"There is little efforts to reform and some member states lack the required budget discipline. ECB monetary policy masks these problems and increasingly threatens financial stability," the GCEE said.
The year 2016 was not a good year as regard to economic reforms, ECB Executive Board Member Peter Praet admitted.
Compared with monetary stimulus, it's more difficult to boost growth through expansionary but coordinated fiscal policies due to lack of comprehensive "fiscal union" in the euro area as well as strict fiscal disciplines.
"The euro area member states should use the tailwinds of the economic upturn to carry out structural reforms," GCEE chairman Christoph Schmidt said.
Currency and politics
Much of the concern in this single-currency economy, the world's second largest after the United States, has focused on the euro currency itself.
Europe's political challenges to the single currency are not new. Indeed, it seems that since its creation, the single currency has seen frequent talk about its impending break-up, HSBC said in the report.
But previously the risk was confined to the peripheral, smaller economies.
In 2015, there was a Greek referendum on a third bailout package fail, in the meanwhile, both Belgium and Spain saw political deadlock in the last year.
In 2016, politics became a bigger driver of the single currency, largely thanks to Brexit and the Italian constitutional reform referendum.
Britain's surprise vote to exit from the EU and the reform being vetoed down in Italy were both negative to the euro.
"The euro appears even more exposed to political risk than it did in the sovereign debt crisis," the HSBC said.
For the next year, risks come from the two economies at the core of the eurozone - France and Germany. Both countries are going to the polls in 2017.
Given the populist and anti-establishment wins in Britain and the United States, it appears that leader of French far-right National Front party, Marine Le Pen, may stand a realistic chance in the presidential elections in 2017, the HSBC said.
(APD)
