The Challenge of Eurozone Reforms in a Time of Uncertain Economic Prospects
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The autumn 2014 brings widespread fear that the crisis in the eurozone may reescalate. A truism is to say that its main drawbacks have not been solved. The problems with the banking sector in the EU are far from solved and the need to clean up bank balance sheets. The necessary process of private sector deleveraging will continue to have an adverse effect on economic activity. The public finances of several eurozone economies are in poor condition. In three out of four of the largest eurozone economies, the general government gross debt-to-GDP ratio is increasing. Several Member States still face considerable structural challenges and the sustainability of economic models will have to be reconsidered, not only in countries such as Greece, Cyprus, Spain, Italy or France but also in Finland. After Standard & Poor’s stripped Finland of its triple “A” rating in October 2014, the only members of this exclusive club in the eurozone remained Germany and Luxembourg.
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