Austerity Measures May Save Greece, But Will They Topple Europe’s Economy?
The euro, hammered on fears that Greece’s debt debacle will spread to Portugal and Spain, rallied 0.7% vs. the dollar Wednesday. Analysts say the European Union is likely to provide aid if Greece follows through on spending cuts and tax hikes, but a tense political process may drag on. Greek Prime Minister George Papandreou is slated to meet German Chancellor Angela Merkel in Berlin on Friday.
But even if global markets settle, tough austerity measures in Greece, Italy, Portugal, Spain and Ireland will take a toll on Europe’s already-anemic economic growth.
Euro zone economies will grow about 1% in 2010 after falling 4% last year, analysts say. GDP rose just 0.4% annualized in Q4, a far cry from the America’s admittedly puffed-up 5.9%. Unemployment in Spain hit 18.8% in February.
With domestic demand lagging through Europe, a weaker euro may help the region’s exports, analysts say. But ballooning budget deficits may become a near-term hurdle. [Read the full article]