While Cyprus is a small country, it seems a big step that the deal to resolve including limiting access to the deposits of the general population, with the threat of actual reductions. Perhaps the EU wanted to test the strategy out and see the reaction it received. It certainly continues to put the future of the euro in play, and at the very least keeps confidence low in a recovery gaining momentum any time soon.
As is shown this week when the ECB lowered interest rates to a record low, in response to manufacturing activity shrinking in April (including in Germany), record high unemployment in the eurozone, and inflation at a three-year low.
Interesting to compare Cyprus to the UK, another economy highly dependent on the financial sector for growth. These economies must re-tool for the future. Financial services can still be a great business for these markets, but in the internet age, many other centers can and do compete. While the US is not going great, there are perhaps more signs there of their more flexible economy finding ways to compete in high end manufacturing, as well as tech & finance.
Can the UK and Europe find ways to invest in future drivers of their economies through this austerity period. The main problem with this austerity is that everyone is doing it. Economies need to be sensitive to their fiscal state, but also ensure that they are either unleashing (i.e. removing barriers) or specifically investing in economic areas that can distinguish them in the future for competitive advantage. Considering the stock markets advances, it seems there are plenty of dollars looking for opportunities. I am sure the UK, or Germany, or even Cyprus has people who have the ideas to lead their economies out of this muddling through. Can their governments be flexible enough to encourage them to act faster and with more aggression?
As is shown this week when the ECB lowered interest rates to a record low, in response to manufacturing activity shrinking in April (including in Germany), record high unemployment in the eurozone, and inflation at a three-year low.
Interesting to compare Cyprus to the UK, another economy highly dependent on the financial sector for growth. These economies must re-tool for the future. Financial services can still be a great business for these markets, but in the internet age, many other centers can and do compete. While the US is not going great, there are perhaps more signs there of their more flexible economy finding ways to compete in high end manufacturing, as well as tech & finance.
Can the UK and Europe find ways to invest in future drivers of their economies through this austerity period. The main problem with this austerity is that everyone is doing it. Economies need to be sensitive to their fiscal state, but also ensure that they are either unleashing (i.e. removing barriers) or specifically investing in economic areas that can distinguish them in the future for competitive advantage. Considering the stock markets advances, it seems there are plenty of dollars looking for opportunities. I am sure the UK, or Germany, or even Cyprus has people who have the ideas to lead their economies out of this muddling through. Can their governments be flexible enough to encourage them to act faster and with more aggression?
The Pimco chief exec poses some good questions for the time:
Where will growth come from?
Whose euro is it? North v South/East
How does the eurozone go from defense to offense
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