In summer, the Europeans have forgotten the pain, went to the beach the sun went. The advent of autumn, the test of reality and also to. Does not address the fundamental problems the euro area.

First, while in May of one trillion U.S. dollars rescue plan to prevent an immediate breach of the Greek, so that from the disintegration of the euro zone. But outside the current euro zone sovereign spreads have been back in May crisis peak levels.

Second, the euro zone out an irresponsible financial “stress test”, declared European banks only need 3.5 billion euros of new capital. But currently only the United Kingdom – Ireland’s capital gap reached 70 billion euros, which greatly increased the awareness of the concerns of other banks.

Finally, the euro-zone growth in the second quarter, a temporary speed boost financial markets and the euro, but now the situation has already demonstrated above, this improvement was short-lived. GDP for all countries outside the euro area continued to decline either (Spain, Ireland and Greece), or stagnation (Italy and Portugal).

Even the temporary success of the German people are really worried about. 2008 ~ 2009 financial crisis, the German GDP fell much more than the U.S. level, this is because the former is more dependent on global trade. Deep down in the rebound after it is normal Moreover, German output is still below pre-crisis levels.

Developed countries may make the second half of 2011 and 2010, economic growth is slowing down all the factors, both in Germany and other euro zone countries to find. Fiscal stimulus is fiscal tightening to the transition, which dragged on growth of hind legs. Inventory adjustments in the past several quarters were stimulated GDP growth, but is now over. Future demand will advance to the current policy (euro version of the “cash for clunkers”) also has expired.

These include: large budget deficits, can not effectively reduce the public debt stock (from a weak government and the public on fiscal austerity and structural reform of the strong opposition by the other), large current account deficit, both difficult to roll over and are unable to pay the private sector , and external debt, the continued loss of competitiveness (from years of labor-intensive export market share eroded by the emerging market countries, with rising costs and union workers since 2008, due to the strong euro), the lower the potential and actual growth rate as well as banks and financial institutions implied by the enormous risks (except Italy).

Financial constraints mean that short-term recession and deflationary pressures, the need for more monetary stimulus so as compensation, while some need to boost domestic demand in Germany – can be realized by delaying the fiscal austerity. However, the two euro zone policy-makers – the European Central Bank and the German Government has been unwilling to take appropriate measures, they want a beautiful quarter GDP figures a trend.

Other countries outside the euro zone countries, not much better than that: although France did not suffer debt crisis, but economic performance can only ones – this is a little in the real estate market is achieved under conditions of prosperity; the unemployment rate has been higher than the 9 % level hovering, deficit to GDP of 8% (higher than Italy), public debt is also rapidly expanding.

French President Nicolas Sarkozy mentioned the restructuring will be met with vocal opposition. French President tough day, even in his own party, the status is also in decline, even in regional elections, lost the left (this is a series of recent elections in Europe, the only winless left) .2012 presidential election, he will face of the Socialist Party candidate – likely to be extremely difficult to deal with Dominique Strauss – Kahn a serious challenge, therefore, Sarkozy is likely to suspend the generous fiscal austerity policies, structural reforms will become invalid.

Belgian Prime Minister, current EU policy on the main Xilaitemu called on European expansion joint and cooperation. But Lai Temu hand in hand with the people at home can not do, what also mention the joint all Europe? Even in the economic growth momentum in Germany, Chancellor Angela Merkel’s position in the ruling coalition is also shaken. Other euro-zone leaders are all under immense political opposition: Silvio Berlusconi in Italy is considered to step down soon, Zapatero of Spain, Greece, Papandreou was not always better.

Thus, the euro area in need of financial constraints, structural reforms and appropriate macroeconomic and financial policies, both in the EU or national level are taking political downhill.

Therefore, I think the best is that the euro zone continued confusion the next 5 years, while the worst case scenario (probability 33% or more) is because the euro zone sovereign debt restructuring and the sluggish economy out of the disintegration.

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