Europe’s chronic crisis

Four years after the euro crisis began, the greatest danger is no longer the collapse of the single currency. Now the worry is that political instability will block reform.

Four years after the euro crisis began, says The Economist, the greatest danger is no longer that "an acute financial crisis" could shatter the single currency. Last year European Central Bank (ECB) president Mario Draghi "sedated" markets by promising to buy unlimited amounts of peripheral bonds in an emergency. But now the key worry is that "political instability or paralysis will block" required reforms.

The economy has emerged from recession, and southern European states have improved their competitiveness. But thanks to ongoing austerity and the credit squeeze resulting from the damaged banking system, growth in the south looks set "to remain well below the rates needed to tackle the problems of high unemployment and crippling debt", says Capital Economics. All the more reason, then, to push on with far-reaching changes to labour and product markets to boost growth. But voters, and many politicians, are already running out of patience, and may lack the guts to inflict potentially painful changes on vested interests for the greater good.

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