Attendees of the World Economic Forum in Davos, Switzerland are reportedly expressing some optimism for the future of the European common currency, a rarity on a continent caught in the grips of a sovereign debt crisis that’s threatening the dream of its unity and the surety of its prosperity.
“A lot of people want to save the euro. This is the principal message from Davos this year,” Mario Moretti Pelegato, president of Italy’s Geox shoe and apparel maker told the New York Times. “In the future when we remember this crisis, we will say this is when Europe learned what to do.”
Many analysts are coming around to the idea that policymakers in Europe now have more time to pursue deeper fiscal unity and stabilize their economies. In December, the ECB lowered interest rates to 1 per cent—a record low. ECB President Mario Draghi also cut reserve requirements for European banks in half, giving them access to great swaths of cash to help stave off risks of insolvency.
But despite the expressions of optimism in Davos, things don’t look so pretty elsewhere in the Eurozone. Portugal’s bond yields are on the rise, and EU and IMF officials are in Athens to bargain with Greek officials on how to ensure the next tranche of bailout money to help sustain the country’s shambolic economy. Key challenges for Greece are the political difficulties of pushing through the austerity demands of its creditors, as well as convincing private lenders to cuts to their returns in a voluntary debt restructuring agreement.