Videos | May 22, 2012

Economic update May 2012

The euro crisis is escalating and has returned to haunt financial markets – with the euro forecast to weaken further.


Greece “in jeopardy”
ING senior economist Martin van Vliet explained in the eZonomics May 2012 economic update video that Greece’s position in the European Monetary Union was in jeopardy – particularly given the “rejection of austerity” in the country’s May general election. But ING’s baseline scenario was that Europe would try to keep Greece in, said van Vliet.
“Whether or not Greece indeed stays in, further action is likely from the European Central Bank,” he said.
Problems in Spain were also mounting.

Euro to weaken further?
Against this backdrop, equity markets around the world dropped and “safe haven flows” pushed 10-year German bund yields to record lows.
Van Vliet said the euro was already at nine-year lows in trade-weighted terms and looked set to weaken further.
“A weaker euro would improve the Eurozone’s export outlook,” he said. “In fact, significant euro depreciation could be a key ingredient in preventing the current crisis from turning really ugly.”

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eZonomics team
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